Overview

"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 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."

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9780199544189

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`This is a good, interesting and useful book. It should be of interest to students of economics, academic economists, regulators, investment bankers, and indeed anyone with an interest in how markets work and in the institutions that help them to do so...The authors have combined economic anaylsis, economic history, and knowledge of law in a short and readable book. They are to be congratulated.' Geoffrey Wood, Economic Affairs `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 `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 `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

<br> 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, Slyvan C. Coleman Professor of Financial<br>Management, Harvard Business School<br> 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<br>Pennsylvania<br> A fascinating look at the investment banking industry from an historical and legal perspecive. It provides the reader with countless insights into the workings of one of the most powerful forces inthe global economy today. --James Harris, Founder, Seneca Financial Group<br> 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 he corporate form. Drawing on the insights of<br>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<br>masterpiece, destined to become a classic. --David Skeel, S. Samuel Arsht Professor of Corporate Law, University of Pennsylvania<br> This is agood, interesting, and useful book. ...The book's wide appeal derives from how it goes about studying its subject, as well as from the interest of the subject itself. ...The authors 'develop an economic rationale for investment bankers'. In other words, they develop an economic<br>explanation of why they exist - they discover what it is that they contribute to the functioning of a market economy. ...Every chapter is worth reading...The authors have combined economic analysis, economic history, and knowledge of law in a short and readable book. They are to be congratulated. I<br>await their next publication with eager anticipation. --Geoffrey Wood, for Economic Affairs<br>

This is a good, interesting and useful book. It should be of interest to students of economics, academic economists, regulators, investment bankers, and indeed anyone with an interest in how markets work and in the institutions that help them to do so...The authors have combined economic anaylsis, economic history, and knowledge of law in a short and readable book. They are to be congratulated. Geoffrey Wood, Economic Affairs 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 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 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

Author Information

Alan Morrison's research is largely concerned with commercial and investment banking. His work has been published in the American Economic Review, the Journal of Financial Economics, the Journal of Business, the Journal of Business Finance and Accounting, the Scottish Journal of Political Economy, the Geneva Papers and Economics Letters. He worked for six years in management consultancy and investment banking before taking his doctorate in Oxford. Since 2000, he has been a University Lecturer at the Saïd Business School and a fellow of Merton College, University of Oxford. Professor Wilhelm's research focuses on investment banks and securities offerings. He has written extensively on initial public offerings and his work has been published in the American Economic Review; Journal of Finance; Journal of Financial Economics; The Review of Financial Studies; Journal of Financial Intermediation; Journal of Money, Credit, and Banking; Oxford Review of Economic Policy; and Journal of Applied Corporate Finance. Professor Wilhelm began his academic career in 1988 at the Wallace E. Carroll School of Management at Boston College. Before joining the McIntire School of Commerce at the University of Virginia in 2002, Professor Wilhelm held the American Standard Companies Chair in Management Studies at the Saïd Business School and was a Professorial Fellow of St Edmund Hall, University of Oxford, where he began serving as a visiting fellow in 1998.

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