tailieunhanh - Lecture Financial markets and institutions (4/e) – Chapter 16

This chapter explore the valuation underpinnings to the question of capital structure. As we shall see, much controversy surrounds the issue. Despite the unsettled nature of the matter, we hope that this presentation will provide the conceptual backdrop necessary to guide the financial manager in capital structure decisions. | 8- McGraw-Hill/Irwin Chapter Sixteen Securities Firms and Investment Banks 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) Investment banks (IBs) help corporations and governments raise capital through debt and equity security issues in the primary market underwriting is assisting in the issue of new securities IBs also advise on mergers and acquisitions (M&As) and corporate restructuring Securities firms assist in the trading of securities in secondary markets broker-dealers assist in the trading of existing securities 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) The size of the industry is usually measured by the equity capital of firms rather than total asset size the largest firm in 1987 had $ billion in total capital the largest firm in 2007 had $ billion in total capital The number of firms in the industry usually follows the overall condition of the economy 5,248 firms in 1980 9,515 firms in 1987 5,808 firms in 2007 As with commercial banks, consolidation has occurred through mergers and acquisitions 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) The largest firms in the industry are diversified financial service firms or national full-service IBs service both retail and wholesale customers by acting as broker-dealers service corporate customers by underwriting security issues The second largest group of firms are full-service firms that specialize in corporate finance or primary market activity (., focus less on secondary market activities) 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) A third group of firms includes the rest of the industry and is further divided into five subgroups IB subsidiaries of commercial banks (., Section 20 subsidiaries) discount brokers regional securities firms specialized electronic trading firms venture capital firms 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) . | 8- McGraw-Hill/Irwin Chapter Sixteen Securities Firms and Investment Banks 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) Investment banks (IBs) help corporations and governments raise capital through debt and equity security issues in the primary market underwriting is assisting in the issue of new securities IBs also advise on mergers and acquisitions (M&As) and corporate restructuring Securities firms assist in the trading of securities in secondary markets broker-dealers assist in the trading of existing securities 16- McGraw-Hill/Irwin Securities Firms and Investment Banks (IBs) The size of the industry is usually measured by the equity capital of firms rather than total asset size the largest firm in 1987 had $ billion in total capital the largest firm in 2007 had $ billion in total capital The number of firms in the industry usually follows the overall condition of the economy 5,248 firms in 1980 9,515 firms in 1987 5,808 firms .