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Payments Netting in International Cash Management: A Network Optimization Approach

Venkat Srinivasan and Yong H Kim
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Venkat Srinivasan: Northeastern University
Yong H Kim: niversity of Cincinnati

Journal of International Business Studies, 1986, vol. 17, issue 2, 1-20

Abstract: Rationalization of global production and operations by multinational corporations have created a large volume of international company funds flows. By a process of netting interaffiliate payments, significant savings in cost can be realized. Shapiro formulated the multinational payment netting problem using linear programming. This paper presents a network optimization approach that is both computationally efficient and intuitively appealing. Further, the proposed approach recognizes the need to integrate the netting system with the MNC's overall cash management systems as well as by explicitly accounting for cash outflows on account of transfer costs. Additionally, the paper provides insight into actual corporate netting practices.© 1986 JIBS. Journal of International Business Studies (1986) 17, 1–20

Date: 1986
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