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Financial Economics by Guofu Zhou, Edwin H. Neave, Frank J. Fabozzi

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WEB–APPENDIX C

INVESTMENT BANKERS AND THE ISSUANCE OF SECURITIES

Throughout this book we have discussed the raising of funds by corporations. Typically, a corporation seeking funds will use the services of an investment banking firm. There are two types of firms involved in investment banking activities: commercial bank affiliated investment banks and (2) unaffiliated (independent) investment banks. The major investment banks fall into the first category. Examples of commercial bank affiliated firms are Bank of America Securities, JPMorgan Securities, Citigroup, Credit Suisse, UBS, Goldman Sachs, and Wachovia Securities. The investment banking firms of Morgan Stanley, Greenhill & Company, and Houlihan Lokey Howard & Zukin are examples of independent investment banking firms.

In this appendix we describe the role of investment bankers in the issuance of securities.

C.1 PUBLIC ISSUANCE OF SECURITIES

Investment bankers performing one or more of the following three functions in working with corporations to raise funds from the issuance of securities:

  • Advising on the terms and the timing of the security
  • Purchasing from the issuer the securities to be offered to the public
  • Selling the securities to the public

In its role as an advisor in the case of a bond offering, investment bankers work with the finance staff of the issuer to design a security structure that it believes will appeal to the investment community but on the best terms possible for the issuer.

When an investment banker ...

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