Along with the growth in business, technology and global trading spread the operations of the businesses in the international market. Multinational companies have implemented the growth strategies that changed the international business environment dramatically after World War II as the World Bank and the International Monetary Fund (IMF) were founded (Osland, 2003).
The key components in International financial market are international bond and equity, of which stocks and currency exchange play an inevitable role in the financial crisis of the world (Aizerman & Hutchison, 2010). According to Cai and Jiang (2008), the understanding of stocks and corporate bond unpredictability is important in examining the behavior of capital market, which is the key component of the international financial market. Therefore, government and corporates involve in the examination of the impacts of the monolithic global financial market.
The internationalization started by trade of goods in the 15th century (Osland, 2003). Cited by Osland (2003), the volume of global trading increased beginning in the 1970s and 1980s that shifted to the globalization characterized by direct foreign investment and technology (World, 2003). Although anti-globalization polarized with liberal trades and radical protesters (Osland, 2003), there are more small businesses starting to become internationalizing than expected (Shrader, Oviatt, & McDougall, 2000). To reducing business risks, which are due to political and cultural pressures, the development of internationalization theories has accelerated even prior to 1990 (Shrader et al., 2000).
The advantage of Internet in the 1990s brought the digital transformation to the traditional business (Andal-Ancion, Cartwright, & Yip, 2003) and directly drove the growing of internationalization (Shrader et al., 2000). The number of countries to enter the international market increased in the 1990s as some new ventures experienced the accelerated internationalization (Shrader et al., 2003), involving tradeoffs theory to manage the risks. Therefore, the portfolio diversification and multicountry network occurred. However, none of these affected the increase of a number of countries entering the internationalization. The impacts of globalization were discussed to be on equality, labor conditions, culture, and the role of the government (Osland, 2003), leading to the increasing in demand for social insurance and liability.
As the world is adjusting to the globalization, the changes in social landscapes (Osland, 2003) and the claimed pollution by industrial technology raises the concern of environmental sustainability. Pollution is much higher in the countries where environmental law is not enforced; there is a growing number of facts and documents of the harmful effects (Osland, 2003).
The dynamics of aggregate bond and stock volatility plays a pivotal role in determining the equilibrium returns of risky bonds (Cai & Jiang, 2008) because the high number of corporate value volatility increases the profitability of default that hurts shareholders. Therefore, the volatility of financial market contributes to the financial crisis. The international financial market nowadays is at the heart of the world financial crisis (Aizerman & Hutchison, 2010).
Andal-Ancion, A., Cartwright, A. P., & Yip, S. G. (2003). The digital transformation of traditional businesses. MIT Sloan Management Review, 44(4), 34-41.
Aizerman, J., & Hutchison, M. (2010). International financial markets and transmission of the crisis: Determinants of exchange market pressure and absorption by international reserves. Conference on Global Economic Crisis: Impacts, Transmission, and Recovery, 3, 1-17.
Cai, N., & Jiang, X. (2008). Corporate bond returns and volatility. The Financial Review, 43(2008), 1-26.
Osland, J. S. (2003). Broadening the debate the pros and cons of globalization. Journal of Management Inquiry, 12(2), 137–154. doi: 10.1177/1056492603252535.
Shrader, R. C., Oviatt, B. M., & McDougall, P. P. (2000). How new ventures exploit trade-offs among international risk factors: Lessons for the accelerated internationization of the 21st century. Academy of Management Journal, 43, 1227–1 247.