Finance foreign corporates

In industrialized countries (USA, Canada, Japan), the corporate form of business organization is the key.

The scale of the corporate groups the following data. According to experts in the world today, there are about 40 thousand interbranch associations with signs of corporate structures, which include about 180 thousand affiliates in 150 countries. They control 50% of industrial production and trade of developed countries, about 80% of all patents and licenses on the latest equipment, technology and know-how.

The concentration and centralization of capital is the starting point for the formation of corporate entities.

By definition, Van Horne: "Corporation - an impersonal company, established by law, it can own property and to commit themselves" .1

S. Ross gives the following interpretation of the concept: "The Corporation - a business founded as a separate entity, consisting of one or more individuals or entities" 2

The main difference from other forms of corporate organization of business is that it exists independently of its owners. Disclaimer - an important advantage compared to the self-employed or a partnership. Corporation shall have the right to raise capital in cash on its behalf, without imposing on their owners to unlimited liability. Therefore, to meet the demands on the corporation can not confiscate private property of the shareholders. To a share of property of the corporation confirmed interest in its share capital, and each holder of its shares belong to the property, which corresponds to the share of its shares in the total volume. These shares can be transferred to others, which is another advantage of corporate ownership. In addition, the company continues its activities and on the retirement of individual shareholders from the implementation of the package to other investors.

In the practice of U.S. corporations can borrow money and own property, sue and be sued, enter into contracts. The corporation may be a general or limited partner in a partnership, as well as own shares in other public company. So her agency is more complex than other forms of business organization. Forming Corporation includes preparation of constituent documents (memorandum and articles). The memorandum contains a range of information, including the name of the corporation, its expected life activity (in most cases it is unlimited), the purpose of business, the names of its owners and managers, the number of authorized shares, the amount of paid-up share capital, etc. After obtaining permission from the state government manufactured articles of incorporation, claiming it as a legal person, and sets out the conditions of its activity.

In large corporations, shareholders (co-owners) and managers - usually different group of people. The shareholders elect the board (board of directors), which appoints leading managers, who are responsible for managing the affairs of the corporation for the benefit of shareholders. Nominally, the shareholders control the corporation through the election of the Board of Directors (Supervisory Board).

As a result of the separation of ownership and management of the corporate form of business organization has a number of advantages. Share capital represented by shares may be transferred to other owners, and therefore the period of existence of the corporation is not limited. Corporation carries out raising equity and debt capital in its own name. As a result, shareholders have limited liability for the debts of the corporation. The most that they can lose - is the money that they have invested in its shares. The relative ease of transfer of ownership, the limited liability of shareholders for its debts, for an unlimited period of life - the undeniable advantages of the corporate form of business organization. If corporations need additional equity capital, it has the right to issue new shares and to attract outside investors. Large U.S. corporations (ATT, Ceneral Motors and others) have hundreds of thousands of owners (shareholders). In such cases, ownership of shares of the share capital may change frequently, without impacting on the continued operation of the corporation. Corporate form has a major drawback, which is double taxation. As a legal entity is subject to income taxes (income). Cash provided to shareholders in the form of dividends are taxed again as their personal income. However, in this case, there is a disadvantage in certain circumstances. In practice, there are ways to avoid double taxation. For example, small corporations in the form of partnerships pay only income tax.

In acute need for capital, characteristic of a developed economy, manifest inconsistency sole ownership and partnership, bringing the corporation has become a major business organizations. Organization of a corporation has many varieties around the world. Rules of conduct on the market vary from country to country, but the main characteristics - the collective (public) ownership and limited liability - remain. Such firms are often called equity or public limited companies, depending on their specific nature and origin.

One of the leading forms of the organization of financial capital is a holding company. In modern conditions holdings operating in the West in all major sectors of the economy: industry, transport, trade, banking, financial services, etc. This form of business organization more viable, flexible and effective. Holding (derzhatelskaya) the company is derived from the English word «to hold * - keep. This particular type of financial company that is created to ownership of a majority of shares in other companies in order to monitor and control their activities. In modern conditions, almost all of the largest U.S. corporations, EU, Canada and Japan are holding a form of organization, that is, at the head of numerous companies within the group of companies, is holding controlling stakes in concentrating all divisions, which gives corporations the integrity and manageability.

There are two types of holding companies:

1) pure holding company that performs only control and management and financial functions;

2) mixed holding company engaged in functions other than those defined as entrepreneurial activity - production and trade, credit and finance, etc.

Holding companies are an important link in the so-called system of participation, through which financiers dominate the formally independent companies that have the capital, many times greater than their own. Holdings by acquiring a controlling interest in a company, are able to nominate their representatives to the Board of Directors and other management-controlled company.

To establish control over other companies holding companies (parent company) are widely used system in the equity share capital of other companies. The parent company is able to provide full control over the subsidiaries, not necessarily providing 100% of the share capital. The parent company, owning 51% of the subsidiary, also has a major impact on its operations. In practice, there are other forms of mutual ownership of capital: a circular, cross and other holdings. Most large corporations carry out overseas operations and are transnational companies (TNCs), and is holding business organization is particularly important, since the direct control of foreign affiliates (testing, inspection) is difficult. Therefore, the parent holding company of TNK does the following: development of economic and marketing strategy, coordination of financial policies of all subsidiaries of large-scale research and development projects, etc.

In the course of its corporate finance management can have quite different objectives:

avoid bankruptcy and financial losses (profits, income and capital);
leadership in the competition;
Maximizing the "price of the company" through the growth of the market value of the shares;
increase in production and sales;
maximize profits and minimize costs;
ensuring an adequate level of return on assets, equity and sales, etc.
The priority of a particular purpose is treated differently in the existing theory of the firm. The most common statement that the corporation must be operated in such a way as to ensure maximum revenue to its owners (owners). This is usually associated with an increase in earnings, high returns on capital with minimal risk. Unambiguous whether such a conclusion? Let us try to answer it.

In the traditional neoclassical economic model assumes that each firm must maximize profits (from the perspective of long-term it is received). In the ideal case where the alleged fairness of information, availability of qualified management and other aspects of the achievement of the maximum possible. So in reality the notion of "normal" profits that suits the owners of the firm. Profitability of different types of production is not the same, it does not cause aspiration of all businesses change their business more profitable. At the heart of this approach is very common pricing system for the products - the full costs plus the average rate of profit.

In addition, the current trend of capital flow between the sectors of the economy and business areas, which involves the alignment margins.

Other researchers suggest the possibility that the basis of the activities of the Group Management commitment is necessary to increase the volume of production and sales. Justified by the fact that many managers represent their position in society to a greater extent with the size of the firm, rather than its income, which is not always certain.

Most prevalent in the West, has received in recent years, "The theory of the firm to maximize the price." The developers of this theory is based on the assumption that none of the existing criteria: sales, profit, profitability, and others - can not be considered as a measure of the effectiveness of the decisions of the financial and investment character.

Choose the criteria should be:

well-founded;
based on the forecast of income owners of the corporation;
acceptable for investment decisions, including the search for sources of equity dividends and financing of the firm.
It is recognized that these conditions are met the criterion of maximization of shareholders' equity, ie, the market price of shares of the corporation. From the perspective of investors in the basis of this approach is the assumption that the well-being of the owners of the company is not in the current mass of profit growth, and to increase the market price of its shares. Therefore, any solution that gives rise in the market value of common shares to be taken by owners and managers of the corporation as their interest.

Criterion of maximizing the corporation's share price as the most feasible and the priority in financial management is applicable only in the event that the stock market has no restrictions (discrimination) in determining the price of financial instruments, ie the principle of "supply-demand".

Note that in the framework of the theory of market pricing of financial assets and the main ideas of the behavior of investors efficient market are as follows.

In this kind of market, any new information as it becomes available immediately reflected in the share price. Furthermore, this information may come to the stock market by accident, and it can not predict in advance when it will arrive and how much will be useful for issuers and investors.

It should be noted that the profit and risk impact on the price of an ordinary share is ambiguous. Higher income is dividend growth, and consequently, an increased demand for shares in the stock market. Conversely, an increase in risk lowers their prices (especially for conservative and moderate investors). There is a "reset" of the stock market by their owners, which leads to financial instability and the loss of corporate investor confidence in its securities.

Thus, the profit and risk - the two key executives of financial management. The ratio of these two variables at any given time determines the specific decisions of the financial manager (director). They aim to achieve two key objectives:

increase in profits or property (equity) capital;
preservation of liquidity, ie, the ability of corporations to fulfill its internal and external financial obligations to partners, government and staff. Before the financial manager is always a local problem - to maximize the dividend per share for each individual transaction.
Global goal - to achieve long-term sustainability of the dividend, the acceleration of capital turnover and increase of security firm from financial risk.

Output. Thus, the effective management of corporate finance is designed to resolve a contradiction arises mezhdustrategicheskimi goals and equity and financial resources to achieve them at the various stages of its development.