Frankel, Tamar --- "The Influence of Investment Banks on Corporate Governance" [2012] ELECD 474; in Hill, A. Claire; McDonnell, H. Brett (eds), "Research Handbook on the Economics of Corporate Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Corporate Law

Editor(s): Hill, A. Claire; McDonnell, H. Brett

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848449589

Section: Chapter 19

Section Title: The Influence of Investment Banks on Corporate Governance

Author(s): Frankel, Tamar

Number of pages: 19

Extract:

19. The influence of investment banks on corporate
governance
Tamar Frankel



This chapter analyses the influence of investment banks on corporate governance. In this
chapter, `corporate governance' or `governance' generally means the part of the institutional
structure that vests the power to control the operations and direction of a corporation. This
part consists of the board of directors and top management.
The first part of the chapter defines `corporate governance' and `management'. The
second part examines the role of finance in shaping corporate management and their strate-
gies. The third part describes investment bankers and what investment bankers currently do.
The fourth part examines the parallel rise of the importance of finance and the influence of
investment bankers on corporate management. It evaluates the role that investment banks
play in corporate governance and the benefits and disadvantages of such influence to the
corporate enterprise and its investors. The fifth part concludes by comparing past and present
practices. Like most cases, there is a slippery slope in which the good could turn into bad, and
life-giving could turn toxic. Therefore, the more difficult question is when and how does the
influence of investment bankers over corporate governance begin to turn from good to bad
and what warning signals show that the beneficial influence of investment bankers on corpo-
rate governance turns or might turn sour. The answer to this question is related to the role that
financing plays in management of large corporations. As the financing role rises, so does ...