International Financial Management: 35 Years Later--What Has Changed?

International financial management, essentially an extension of corporate finance to a global context has undergone an extraordinary metamorphosis since the mid-1960's. From a relatively stable and predictable economic environment at that time, the forces of inflation, technological innovation, and deregulation led to new and volatile markets and a plethora of financial instruments. Many of these developments would not have been possible without the academic research in this subject, which went from mainly descriptive and anecdotal to analytical. Arguably the most important theoretical developments in finance took place since then: the capital asset pricing model [CAPM], option pricing models, and the recognition of agency costs as a potential conflict of interest between management and shareholders of a firm. These are still areas of disagreement: the cost of capital for a company with global markets and investors needs more study; managing currency, interest rate, and other risks in a complex international organization is still a work in progress. On balance, the case can be made that the changes seen over more than three decades have been positive.