The firm's management style determines whether to decentralize or centralize its financial management between the parent and the foreign subsidiaries.

Question

Quizplus · Accepted Answer

The decision to centralize or decentralize financial management in a multinational firm is typically influenced by the firm's management style and approach to decision-making. A centralized financial management approach involves centralizing financial decisions and control at the parent company level, while a decentralized approach involves delegating financial decision-making authority to foreign subsidiaries. Therefore, the management style of the firm plays a key role in determining whether to centralize or decentralize its financial management.

The Firm's Management Style Determines Whether to Decentralize or Centralize