Details
- Provides a first theory of investment banking, referencing three centuries of the industry's evolution
- Provides a comprehensive introduction into the theory, history, and practice of investment banking
- Draws on historical and institutional elements within banking and commerce to provide an economic rationale for the dominance of investment banks in capital markets
- Sheds new light on state intervention in the operation of capital markets and provides a technological explanation for recent capital market restructuring
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 organization. Although investment decisions rely upon price-relevant information, it is impossible to establish property rights over it and hence it is very hard to coordinate 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.
The authors substantiate their theory with reference to the industry's evolution during the last three centuries. They show how investment banking networks were formed, and identify the informal contracts that they supported. This historical development points to tensions between the relational contracting of investment banks and the regulatory impulses of the State, thus providing some explanation for the periodic large-scale State intervention in the operation of capital markets. Their theory also provides a technological explanation for the massive restructuring of the capital markets in recent decades, which the authors argue can be used to think about the likely future direction of the investment banking industry.
Readership: Academics working in finance, economics, law, and social and economic history; MBA and graduate students taking modules in finance; investment bankers and professionals in the finance sector.
1: Introduction
2: Institutional Theory
3: An Institutional Theory of Investment Banking
4: Investment Banking Origins
5: The Rise of the Investment Bank
6: Investment Banking in the Age of Laissez-Faire
7: Leviathan and the Investment Banks
8: The Modern Industrial Revolution
9: Inside the Investment Bank
10: What Next?
Alan D. Morrison, University Reader in Finance, Saïd Business School and Fellow of Merton College, University of Oxford, and William J. Wilhelm, Jr., Murray Research Professor, McIntire School of Commerce, University of Virginia
"Anyone hoping to understand investment banking must read Morrison and Wilhelm's book. Drawing up centuries of rich history, they advance a theory of investment banking that is relevant today for business people, regulators and scholars." - Peter Tufano, Sylvan C. Coleman Professor of Financial Management, Harvard Business School
"This book fills an important gap in the literature by providing a comprehensive coverage of the investment banking industry. It is an outstanding contribution by two experts in the field." - Franklin Allen, Nippon Life Professor of Finance and Economics, The Wharton School, University of Pennsylvania
"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
"Morrison & Wilhelm offer the most compelling explanation yet of the investment banking industry, from its unlikely emergence from the commodities market in the seventeenth century to the investment banks' recent shift from the partnership to the corporate form. Drawing on the insights of institutional economics, they show how investment banks function as information intermediaries in a wide range of market transactions. Vivid and meticulously researched, the book takes us inside the mysterious world of investment banking and shows what makes it tick. It is an intellectual masterpiece, destined to become a classic." - David Skeel, S. Samuel Arsht Professor of Corporate Law, University of Pennsylvania
