Slide MGT411 Slide11

Chapter 14
Global Cost and
Availability
of Capital

Copyright © 2007 Pearson Addison-Wesley. All rights reserved.

Global Cost and Availability
of Capital
• Global integration of capital markets has given
many firms access to new and cheaper sources
of funds beyond those available in their home
markets.
• If a firm is located in a country with illiquid,
small, and/or segmented capital markets, it can
achieve this lower global cost and greater
availability of capital by a properly designed
and implemented strategy.
Copyright © 2007 Pearson Addison-Wesley. All rights reserved.

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Exhibit 11.1 Dimensions of the
Cost and Availability of Capital
Local Market Access
Global Market Access
Strategy
Firm-Specific Characteristics

Firm’s securities appeal only
to domestic investors

Firm’s securities appeal to
international portfolio investors

Market Liquidity for Firm’s Securities

Illiquid domestic securities market
and limited international liquidity

Highly liquid domestic market and

broad international participation

Effect of Market Segmentation on Firm’s Securities and Cost of Capital
Segmented domestic securities
market that prices shares
according to domestic standards
Copyright © 2007 Pearson Addison-Wesley. All rights reserved.

Access to global securities market
that prices shares according to
international standards
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