And MA

The Issuing and Financing Process

How do corporations actually arrive at their current capital structures? This chapter gives you the framework of how to think about the processes affecting capital structure—how changes in debt-equity ratios come about. Along the way, it also covers institutional issues that are relevant to the capital issuing process. Specifically, this chapter explains the role of Investment Banks ("I-Banks"). They are not only plum employers of finance graduates, but they are also the most important intermediaries through which large corporations tap the capital markets. The chapter focuses on two important functions of investment banks: Facilitating the underwriting of securities and advising firms on mergers and acquisitions.

The next chapter will lay out what we know empirically about how actual corporate capital structure among publicly trading corporations has developed in the United States over the years.

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