Martin Lustgarten

The Role of Investment Banks in the Economy

Investment banking is a part of banking that deals with creating capital for the government, companies and other entities. An investment banker is a person whose primary objective is to raise capital for a client like the government or companies. An investment bank is an intermediary that deals with a variety of services like underwriting, facilitating mergers, acting as intermediaries between the public and securities issuer, and acting as a financial adviser. Essentially, investment banks are bridges between an investor and large enterprises. There are investment experts like Martin Lustgarten who play an important role in investment banking.

The role of investment banks

Role as advisors

Companies or governments are usually tasked with the decision of deciding how to raise capital. Mostly, they rely on investment banks for advice, whether it is a large investment bank or a smaller banker. Investment banks advise their clients by analyzing the current investing climate so that they recommend the best method to raise funds. They could advise a company or government to sell an ownership stake or borrow from the public by issuing a bond. If a company wants to offer stock, a financial analyst looks at different factors like the strength of the management team or earnings potential to determine the share worth of the company. If a company is offering bonds, the investment bank recommends the money it will pay borrowers by analyzing prevailing interest rates of similarly rated ventures. These banks also advise their clients on mergers and acquisitions. They advise clients on the best way to structure the deal such that it will favor the buyer or advise on the worth of the company.

Underwriting stocks and bonds

Investment banks must underwrite the securities when a company decides to raise funds through debt offering or equity. In that situation, the entity purchases a given number of shares or bonds at a given price and re-sells the bonds or shares through an exchange. Mostly, the role of underwriting securities is tasked to more than one bank. They also deal with necessary documentation in stock offerings.

About Martin Lustgarten

Martin is an investment expert, and he is one of the smartest brains in investment banking. Martin is a citizen of Venezuela and Austria. The investment expert believes in international investments, and that is why his wealth is in different countries. He predicts markets then quickly acts when necessary.

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