Thursday, March 1, 2012

Global Financial Synchronization

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In the last few decades, with the ushering in of globalization, the world woke up to the marvelous transformation of its financial administration and effectuation of information and informatics. At the end of the World War II, nations observed restrictions on cross-border trade (Stulz, 2005). Easing financial restrictions and opening trade barriers led to what we know today as ‘financial globalization’. In almost every continent, organizations became accustomed to a unique system of financial synchronization that eased how business is conducted. On the other hand, new organizations that took pleasure at helping other organizations ease their financial problems sprouted in financial stable nations of North America and Europe consequently leading to the opening branches in far away lands. Building of institutions, enhanced market discipline and deepening financial sector hastened human interconnectedness, business trust, and business risk taking. It has now become an acceptable standard procedure in academia and polity circles that financial globalization can be applied globally to benefit any country.

In some parts of the world, especially in economically advanced nations, instances of ‘globalization backlash’ may be experienced as a result of inequitable distribution of wealth as was seen during the WTO meeting in Seattle in 1999. Sbordone (2007), argues that trade integration, bolstered by policy incentives, is what triggers competition. Corporate governance, defined as the legal, institutional, and cultural mechanisms that help owners and stakeholders have control over the activities of insiders and management has been, according to Oxelheim and Trond (2001), beneficial since the rise of globalization. Despite the efficiency and change in global business trends, risk factors will be there to stay. In modern times, firms can either opt for the Anglo-American system, the Japanese system, the German system, or the Latin system to enhance corporate governance (Oxelheim and Trond, 2001).

References

Stulz, R. (2005). Presidential address: The limits of financial globalization. The journal of finance, Vol. LX, No. 4.

Sbordone, A.M. (2007). Globalization and inflation dynamics: The impact of increased competition. National Bureau of economic research. Working paper 13556.

Oxelheim, L. and Trond, R. (2001).The impact of foreign board membership on firm value. IUI, the Research Institute of Industrial Economics. Working Paper No. 567.
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