The International Control Conundrum with Exchange Risk: An EVA Framework

Laurent L Jacque and Paul Vaaler ()
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Laurent L Jacque: Tufts University and Groupe HEC (France)

Journal of International Business Studies, 2001, vol. 32, issue 4, 813-832

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

Date: 2001
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