International finance and domestic finance

International finance and domestic finance

There are some of main differences between international and domestic financial management. It is include institutions, foreign exchange and political risk, and the required modifications of financial theory and financial instruments.

International financial management requires an understanding of cultural, historical, and institutional differences such as those affecting corporate governance.

Although both domestic firms and multinational enterprise are exposed to foreign exchange risks.

Multinational enterprise also face other risks that can be classified as extensions of domestic finance theory. For  example, the normal domestic approach to the cost of capital, source debt and equity, capital budgeting, working capital management, taxation, and credit analysis need to be modified to accommodate foreign complexities. Moreover, a number of financial instruments that are used in domestic financial management have been modified for use in international management.