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The International Control Conundrum with Exchange Risk: An EVA Framework

Author

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  • Laurent L Jacque

    (Tufts University and Groupe HEC (France))

  • Paul M Vaaler

    (Tufts University)

Abstract

Principal-agent problems between corporate parent and subsidiary operations are frequently exacerbated in international settings by exchange rate fluctuations between the foreign subsidiary's local currency and the parent multinational corporation's reference currency. We develop a conceptual solution to this international control conundrum using Economic Value Added as the sole performance numéraire. Our framework facilitates assessment of foreign subsidiary performance in emerging-market countries in the presence of unexpected, exchange-related shocks.© 2001 JIBS. Journal of International Business Studies (2001) 32, 813–832

Suggested Citation

  • Laurent L Jacque & Paul M Vaaler, 2001. "The International Control Conundrum with Exchange Risk: An EVA Framework," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(4), pages 813-832, December.
    • Handle: RePEc:pal:jintbs:v:32:y:2001:i:4:p:813-832
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    Cited by:

    1. Dikova, Desislava & Smeets, Roger & Garretsen, Harry & Van Ees, Hans, 2013. "Immediate responses to financial crises: A focus on US MNE subsidiaries," International Business Review, Elsevier, vol. 22(1), pages 202-215.
    2. Andreas Hoffjan & Timo Kornetzki, 2005. "Währungsumrechnung im Planungs- und Kontrollprozess," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 16(3), pages 325-348, September.
    3. Chris Changwha Chung & Seung-Hyun Lee & Jeoung-Yul Lee, 2013. "Dual-Option Subsidiaries and Exit Decisions During Times of Economic Crisis," Management International Review, Springer, vol. 53(4), pages 555-577, August.
    4. Chung, Chris Changwha & Lee, Seung-Hyun & Beamish, Paul W. & Southam, Colette & Nam, Daeil (Dale), 2013. "Pitting real options theory against risk diversification theory: International diversification and joint ownership control in economic crisis," Journal of World Business, Elsevier, vol. 48(1), pages 122-136.

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