Investment Banking - Investment Banking: Past, Present, and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
8 Journal of Applied Corporate Finance • Volume 19 Number 1 A Morgan Stanley Publication • Winter 2007 Investment Banking: Past, Present, and Future 1. That is, the total number of employees, excluding administrative staff. 2. The data in this paragraph are taken from the SIA, the Securities Industry Data- bank, and Factbook. 3. See A. D. Morrison and W. J. Wilhelm, Jr., (2007), Investment Banking: Institu- tions, Politics and Law , Oxford: Oxford University Press. by Alan D. Morrison, Saïd Business School, University of Oxford and William J. Wilhelm, Jr., McIntire School of Commerce, University of Virginia nvestment banks are changing fast. Forty years ago the industry was dominated by a few small partnerships that made the bulk of their income from the commissions they earned fl oating securities on behalf of their clients. Today’s investment banks are huge full-service ± rms that make a substantial proportion of their revenues in technical trading businesses that started to attain their current prominence only in the 1980s. The CPI-adjusted capitalization of the top ten invest- ment banks soared from $1 billion in 1960 to $194 billion in 2000. Between 1979 and 2000, the number of profes- sionals 1 employed by the top ± ve investment banks (ranked by capitalization) rose from 56,000 to 205,000. 2 The enormous upheavals documented in the previous paragraph raise a number of dif± cult questions. What have the investment banks of today got in common with their predecessors? Is it possible to draw any meaningful parallels between businesses that today call themselves investment banks and the investment banks of 20, 40, or even 100 years ago? What is the source of the recent changes to the investment banking landscape, and can we say anything about the likely future direction of the industry? These questions point to a more fundamental one: namely, if investment banks did not exist, would we need to invent them? In other words, what are investment banks for ? A suf± ciently general answer to this question should explain the past evolution of the investment bank, shed some light upon investment banking policy debates, and help us to understand the forces currently shaping the investment banking industry and their likely impact. Surprisingly, although a wealth of academic and policy work analyzes speci± c lines of business within investment banks, very little has been written to explain the economic purpose of the investment banking institution. In a recent book we attempt to ± ll this gap. 3 We argue that invest- ment banks have traditionally added value in transactions involving assets over which it is extremely hard to establish property rights. Since their inception, investment banks have facilitated complex deals by creating a marketplace in which informal property rights over these assets could be created and enforced. Over the past 200 years a series of technological advances has altered the economic situa- tions that require informal property rights, and investment
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/13/2011 for the course ECON 101 taught by Professor Smith during the Spring '11 term at Akita International University.

Page1 / 13

Investment Banking - Investment Banking: Past, Present, and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online