Underwriting and in Investment Banking - Research Paper Example

Underwriting and Research in Investment Banking Underwriting and Research in Investment Banking Conflict of interest among underwriters and researchers in investment banking emerges due to the existence of different individual and corporate factors. Conflict of interest that is apparent among different departments in investment banking results to some dreadfully and severe consequences such as increased cases of market manipulation that risk business activities and operations. For instance, in United Kingdom investment banking sector, different underwriters have a conflicting interest over whether to facilitate effective communication between the Chinese banks and United Kingdom banks.

There is also conflict of interests between investment banks and equity trading and research organisations. In this case, conflict of interests emerges due to confusion in equity research units common in banking sector. In common scenarios, equity analysts facilitate coverage and operations of companies in order to come up with formidable relationship that can result to increased profitability among banks (Rosenbaum and Joshua, 2009). The act of various investment banks to initiate coverage of the banks for their own benefits has resulted to conflict of interest among underwriters and researchers.

Moreover, many banks own retails brokerage. This has resulted to sale of surplus shares in Initial Public Offering. The existing conflicts of interest have significantly affected the operation of the entire investment banking sector as well as the role and involvement of research organisations in banking researches. A part from effecting their investment banking operations, the conflict of interest has as well harmfully affected the investment banking ethical practices as well as corporate social responsibility for underwriters.

In the real situation and as per their social responsibility requirements, underwriters are expected not to compromise the quality of their services to achieve their own personal interest. However, due to the prevailing conflict of interests, underwriters have considerably compromised the quality of their services to fulfil their personal interest. Despite having negative impact in business, operation the conflict of interests has also resulted to the emergence of healthy and productive competitions required in the improvement of service delivery.

To ensure the enhancement of their ethical and corporate social responsibilities, banking sector should facilitate effective communication among stakeholders to eliminate the conflicting interests in their service delivery. Effective dialogue as well as total consideration of the interest of all players including potential and existing customers is the most effective way and method of ensuring that underwriters comply fully with the existing ethical standards and corporate social responsibilities.

Reference Rosenbaum, J. and Joshua P. (2009). Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions. Hoboken, NJ: John Wiley & Sons