Handbook of Finance: Financial Markets and Instruments

Chapter 6. Investment Banking

K. THOMAS LIAW, PhD

Professor of Finance and Chair, St. John's University

Abstract: Investment banks operate in investment banking, principal transactions, and asset management and securities services. Regulatory changes, globalization, and advances in technology have reshaped the industry. Deregulation in many countries has permitted large financial firms to add different services and products while operating on a global basis. Scandals like Enron and WorldCom, however, have prompted regulators to impose stringent requirements, such as the Sarbanes-Oxley Act of 2002, on the conduct of public companies to restore public trust. Wall Street houses no longer can ask their research analysts to push the stocks of their investment banking clients. Research analysts must make independent recommendations about their assessment of the client's business prospects. Furthermore, advances in technology have enabled clients to access financial services offered by investment banks whenever and wherever they choose. Technology also has allowed investment banks to design, price, and trade complex securities.

Keywords: investment banking, full-service investment banks, boutique investment banks, underwriting, mergers and acquisitions, private equity, venture capital, buyouts, merchant banking, trading, financial holding companies, bulge bracket, fairness opinion, restructuring, financial engineering, swaps, credit derivatives, asset management, repurchase agreements, risk ...