Why have investment banks played such a dominant role in the markets in recent years? By asking what investment banks contribute to economic performance, the authors provide a framework for understanding their historical evolution, economic power, and periodic bouts of conflict with the state.
Investment Banking: Institutions, Politics, and Law provides an economic rationale for the dominant role of investment banks in the capital markets, and uses it to explain both the historical evolution of the investment banking industry and also recent changes to its organisation. Although investment decisions rely upon price-relevant information, it is impossible to establish property rights over it and hence it is very hard to co-ordinate its exchange. The authors argue that investment banks help to resolve this problem by managing “information marketplaces,” within which extra-legal institutions support the production and dissemination of information that is important to investors. Reputations and relationships are more important in fulfilling this role than financial capital.
‘A fascinating look at the investment banking industry from an historical and legal perspective. It provides the reader with countless insights into the workings of one of the most powerful forces in the global economy today.’ James Harris, Founder, Seneca Financial Group
2007, Published by Oxford University Press, ISBN 0 199 29657 X, 348pp, HB