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Chapter 14
Global Cost and
Availability
Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-2
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
Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-3
Segmented domestic securities market that prices shares according to domestic standards
Access to global securities market that prices shares according to
international standards Illiquid domestic securities market
and limited international liquidity Firm’s securities appeal only
to domestic investors
Firm’s securities appeal to international portfolio investors
Highly liquid domestic market and broad international participation
Firm-Specific Characteristics
Market Liquidity for Firm’s Securities
Effect of Market Segmentation on Firm’s Securities and Cost of Capital
