A greater quality of information is available for example in the leading financial centers globally that would otherwise not be the case in more remote regions, making it possible to make more informed and correct decisions (Mitsos, 1997). The accuracy, efficiency and speed of decision-making based on more efficient use of information has led to more advanced forms of cash management than would have been the case on a per-subsidiary level (Fresard, Salva, 2010). Lastly, by having a centralized depository of cash for all subsidiaries, firms can hold less accumulated total cash, freeing up financial resources for other investments (Fresard, Salva, 2010). Companies become more efficient at financial management as a result.
References
Elliott, Graham, & Bewley, Ronald. (1994). The transmission of monetary policy: The relationship between centralized depositories and Monetary policy. Economic Record, 70(208), 19.
Fresard, L., & Salva, C.. (2010). The value of excess cash and corporate governance: Evidence from U.S. cross-listings. Journal of Financial Economics, 98(2), 359.
Hill, C.W.L. (2011). International business: Competing in the global marketplace (8th ed.). New York, NY: McGraw-Hill/Irwin.
Nicholas Mitsos. (1997, November). Virtual Group Treasury. TMA Journal, 17(6), 24-30.
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Dividend remittances are often used as a means to transfer funds and capital for investment to foreign subsidiaries and bypass taxes and duties in the process (Hill, 2011). This approach to capital transfer happens most often in those organizations that are based on countries that have stable...
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