The Globalization of Financial Markets
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Globalization is having pronounced effects on many industries around the world. But perhaps one of the areas globalization will change the most is in financial markets. As barriers between national financial markets are rapidly being broken down, expect huge changes in the coming years.
1. How will the globalization of financial markets change the way corporations do business?
2. Are there any challenges that stock markets face in their attempts to expand internationally?
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The solution discusses the globalization of financial markets.
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1. Globalization of Financial Markets
There has been an increase in cross border financial flows around the world. There are multiple reasons for it including:
- Expansion of activities by banks and financial institutions across geographies in which they act as intermediaries to facilitate funds transfer from lenders to borrowers.
- Increase in cross border orientation by mature securities markets. New securities getting issues in such as way that appeals to international investors.
These changes have led to changes in control on cross-border financial flows as well as liberalisation of financial markets. It has led to world of opportunities opening up for the financial industry. Developing financial globalization can be attributed to both technological and financial innovations. Information technology has become more reliable as a result of which cross border financial transactions have become easier to execute and more secure. Financial markets have in particular become favorite destination for a wide array of financial products called derivative instruments which enable investors to customize their risk exposure.
Globalization can have an effect on firm's cost of capital because it alters risk of its investment. If a company does business in domestic market only and it wants to raise ...
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