B A 323 Lecture Notes - Lecture 2: Morgan Stanley, Financial Intermediary, Investment Banking
Document Summary
How is capital transferred between savers and borrowers. Business sells its stock or bonds directly to savers without going though any financial institution. Typically used say small firms and little capital is raised. Directly people who are selling it to the buyer. Transfers that go through an investment bank such as goldman sachs or morgan stanley. Investment banks - operates as a middle man. Companies sells stock or bonds to the underwriter, which is then sold by the investment bank to savers. Loans (direct) made through a financial intermediary such as a bank, insurance company, or a mutual fund. Direct loan from the bank to the company. Intermediary obtains funds from savers in exchange for securities. Capital allocation process - in a well-functioning economy, capital flows efficiently from those who supply capital to those who demand it. More efficient, higher the rate of economic growth. Suppliers of capital - individuals and institutions with excess funds".
