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.

How are dividend remittances used by firms to transfer funds from foreign subsidiaries to the parent company?

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...

Dividend remittances are also taxed by nations when the outflow of funds becomes so significant as to impact the performance of an industry or economy (Wacker, 2004). Nations have been known to create a tariff on dividend remittances to discourage their use of the balance of trade, interest rates, and money supply of a nation is facing uncertainty (McCarthy, Pointer, Ricks, Rolfe, 1993).
Parent companies also use dividend remittances to quickly fund operations in emerging nations, as this approach to transfer provides for less downside risk overall (Wacker, 2004). It is also highly efficient at moving currencies across borders quickly to avert rapid currency fluctuations and devaluation i8n a host nation, making this form of transfer one of the most commonly used in struggling economies of Ireland, Iceland, Greece and others (Hill, 2011). Dividend remittances are also extensively used for creating a foundation for joint venture funding and shared risk across global supply chains as well (Wacker, 2004). The concept of the dividend remittance as a means to gain greater flexibility in meeting the capital requirements is now a mainstream strategy (Hill, 2011). Even with tariffs levied they continue to proliferate for financing growth.

Reference

Hill, C.W.L. (2011). International business: Competing in the global marketplace (8th ed.). New York, NY: McGraw-Hill/Irwin.

McCarthy, Mark, Pointer, Martha, Ricks, David, & Rolfe, Robert. (1993). Managers' views on potential investment opportunities. Business Horizons, 36(4), 54.

Walter L. Ness Jr. (1975). U.S. corporate income taxation and the dividend remittance…