Investment Banking Firms And Their Valuation Practices
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A standard criticism of investment banking firms is their approach to valuation which includes determining a price for an offering and then manipulating the input variables into conventional valuation techniques to justify the arrived price. If that is so, wouldn't use of heuristics rather than more sophisticated valuation procedures expedite the procedure? What do you think? Explain. Please provide sources.
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The expert examines investment banking firms and their valuation practices.
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HEURISTICS AS A VALUATION METHOD
Firms may issue new securities and sell them to the general public through investment bankers that serve as a middleman to channel money from investors to the firms that need capital (Mayo, 2003). However, they are not financial intermediaries because they do not create claims on themselves. Investor's claim is on the firm that issues the stocks and not on the investment banker that only facilitated the transaction.
The firm that is in need of funds and the ...
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