ABSTRACT
Globalization has induced some identifiable finance innovations. The most visible aspects of this change are related to the way multinational corporations fund their operations, the manner in which they manage the finance function, and how they measure corporate performance. This chapter describes tendencies in financial innovation and provides a rationalization justifying these trends. Non-US multinationals used to depend on local financial markets to finance their operations. In the era of globalization these corporations prefer to draw financial resources from the US and European financial markets, to take advantage of the high degree of liquidity existing in these centers. The extensive use of derivatives is an important trend. A 1995 survey of major non-financial firms revealed that at least 70 percent of them are using some form of financial engineering to manage exchange rate, interest rate, or commodity price risks. Another important tendency in cross-country finance is the application of new yardsticks to measure corporate performance.
