Investment Banking

Investment banking is a specialized division of banking that assists individuals, corporations, and governments in raising capital by underwriting or acting as the intermediary in the issuance of securities. Investment banks also provide a wide range of financial services such as mergers and acquisitions (M&A) advisory, corporate restructuring, asset management, trading of derivatives and equities, and other financial advisory services.

Key functions of investment banks include:

Underwriting: Investment banks help companies issue new securities, such as stocks or bonds, by purchasing them from the issuer and then selling them to investors. This process involves assessing the risk and determining the price at which the securities will be offered to the public. For example, an IPO, although most underwritings are not the initial offering.

Mergers and Acquisitions (M&A): Investment banks advise companies on buying, selling, or merging with other companies. They help clients evaluate potential targets, negotiate deals, and structure transactions to achieve strategic goals.

Corporate Finance: Investment banks provide advice on capital raising strategies, such as issuing stocks or bonds, to finance growth initiatives, acquisitions, or other corporate activities.

Trading and Sales: Investment banks facilitate trading of various financial instruments, including stocks, bonds, currencies, commodities, and derivatives. They also provide sales services to institutional clients, such as hedge funds, pension funds, and mutual funds.

Research: Investment banks conduct financial research and analysis to provide insights and recommendations to clients and investors. This includes industry research, company analysis, and market forecasts.

Overall, investment banking plays a crucial role in the global financial system by providing capital to businesses, facilitating corporate transactions, and contributing to market liquidity.

Compare with Commercial Finance.

See also Securities Regulation, History of Securities Regulation, Equity in the Legal System, History of Banking Regulation, and Anti-trust Compliance Measures.