Until the 1970s, almost all investment banking firms were private partnerships, generally with a limited capital base. When underwriting large securities offerings, these partnerships almost always formed underwriting syndicates, in order to meet regulatory capital requirements, distribute the securities, and share risk. Many investment banking firms had “relationships” with corporations. In the 1970s, the investment banking industry began to change to a more “transactional” form, where corporations use different investment bankers for different services, on an as-needed basis. Investment banking firms have grown in size and scope, largely through mergers, and most of the larger firms have converted to publicly traded stock companies. Requirement: Assuming as an Investment Banker a). Discuss why the company needs to raise capital – should they raise debt or equity, and what’s the best way to do it? Shedding light on the several aspects, ALSO DISCUSS why firms go public, mechanism design, the compensation of investment bankers. b). Assuming a sell-side analysts affiliated with managing underwriters, how do you face conflicts of interest.
Until the 1970s, almost all investment banking firms were private partnerships, generally with a limited capital base. When underwriting large securities offerings, these partnerships almost always formed underwriting syndicates, in order to meet regulatory capital requirements, distribute the securities, and share risk. Many investment banking firms had “relationships” with corporations. In the 1970s, the investment banking industry began to change to a more “transactional” form, where corporations use different investment bankers for different services, on an as-needed basis. Investment banking firms have grown in size and scope, largely through mergers, and most of the larger firms have converted to publicly traded stock companies.
Requirement:
Assuming as an Investment Banker
a). Discuss why the company needs to raise capital – should they raise debt or equity, and what’s the best way to do it? Shedding light on the several aspects, ALSO DISCUSS why firms go public, mechanism design, the compensation of investment bankers.
b). Assuming a sell-side analysts affiliated with managing underwriters, how do you face conflicts of interest.
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