Investment Banking

In: Business and Management

Submitted By KaziInam
Words 11416
Pages 46
Investment Banking: Past, Present, and Future by Alan D. Morrison, Saïd Business School, University of Oxford and William J. Wilhelm, Jr., McIntire School of Commerce, University of Virginia

investment 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 floating securities on behalf of their clients. Today’s investment banks are huge full-service firms 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 investment banks soared from $1 billion in 1960 to $194 billion in 2000. Between 1979 and 2000, the number of professionals1 employed by the top five 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 difficult 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 sufficiently 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…...

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