Indonesia Expat

How Do Investment Banks Help The Economy?

investment bank
How Do Investment Banks Help The Economy?

Adequate investment is the key to future success. The financial aspects of a country determine its economy, and that is where investment banks lie.

The main role of any investment bank is related to commercial institutions, but they are not like commercial banks.

Their difference can be judged to understand the role of investment banks in particular.

However, investments are subject to market risk, and investment banks do work in two ways: trading and financial marketing. The process of work for investment banking depicts both the present and future of both the government and small & large companies.

In addition, these large financial institutions decide the essence of any fundraising activities to ensure the economic factor of a country.

However, the role of commercial and retail stores is more understood than the significant role of financial banks. But it contributes to the economy pretty wisely by considering a foundational role in financial services.

What Is Investment Banking?

To be in the business, it is very crucial to understand investment banking. The responsibilities of modern investment banking have changed a lot, and that undertakes a wide range of services and products for government entities, institutions, and corporations.

However, if you take a closer look, you will find that their investment banks are part of large financial institutions which contemplate more than one task in the economic process.

Let’s look at the key functions of the investment bank:

  • Large financing projects.
  • Bond issue.
  • Capital raising.
  • Asset management.
  • Selling and purchasing securities.
  • Determining acquisitions and IPO prices.
Role Of Investment Banks

As we have already discussed, the role of investment banks is quite versatile in the economic sector. Investment banks are quite special due to their understanding of regulatory requirements regarding bonds and stocks.

Anyone would go for investment banking as they need adequate advice to ensure a proper bridge between investors and large enterprises. It helps to mitigate any kind of challenge regarding investments. Thus if you consider Bank Pelaburan in financing derivative products or bond issues, you should not neglect the role of investment banks.

1. Plays The Advisor Role 

The main role of investment banks is to provide adequate advice with proper instructions to the government and also to the investors.

Investments become difficult when you do not know the current condition of the economy. However, investment banks help you to utilize financial models. Wherever you go for stocks, the offerings can be best understood through their financial analyst.

Advising on merger and acquisition, interest rates, and earning potentials are common themes of investment banks to advise.

2. Helps With Stocks And Bonds

Underwriting stocks and securities is another common nature of investment banks. Whenever a company decides to go for its fundraising process, they consider investment banks in the way.

An investment bank underwrites the securities with a pre-determined price and then sells them through an exchange. For instance, if a company decides to raise some funds through an initial public offering, the investment bank will help them to do that.

They will assume the investor’s intent and decide the particular price and how many shares will be sold. First, the investment bank decides to buy that share with the decided price and then resells it to gain profit.

3. Research On The Market 

Researching the market is very crucial for investors, and that is where the main role starts the investment banks as mediums. A proper market understanding is necessary for investors to make a suitable investment in small and large companies.

When investment banks decide to buy all the shares, they do proper market research to possess such risk.

4. Wealth Management 

The role of investment banks sometimes goes beyond the businesses and targets retail investors. Individuals and families also need financial advice regarding their retirement and long-term plans.

These investment bankers are quite efficient in helping them privately.

5. Asset Management 

These banks are very efficient in managing the assets of investors.

Depending on the various portfolios, it decides the pensions, funding, insurance, and managing the whole asset of a department. The experts of investment banks decide on mixing the stocks and other investment vehicles like debt instruments.

The Functions Of Investment Banks Impact The Economy.

The foundational role of the investment banks is quite amazing to encourage capital marketing, including mergers, corporate restructures, acquisitions and takeovers.

These functions quite efficiently impact the economy, and that is what we are going to discuss with you.

1. Gross Domestic Production Growth

Investment banks are always contributing to the economic development of a country. They ensure the investments, and thus they create opportunities for healthy production and processing. It ultimately increases the health of a country’s GDP.

2. Capital Formation

Capital formation is a critical task in balancing the economic factor. Investment banks minimize the deficiency of capital by stimulating the investment process and savings as well.

In addition, it mobilizes the small and big sources of money and makes them available in the capital market in the role of investor.

3. Employment Opportunity

Regulating the economic factors ultimately helps the employment process. Investment banks help to create large opportunities for companies. When a company grows large, it will create enormous opportunities for new employment.

4. Liquidity 

Investment banks increase the chance of liquidity in the market.


We all know that investment banks match the sellers and the investors. In that way, they also can manage the holds and transactions between these providers. So, there is a bigger chance of cash liquidity in the market.

5. Development Of Infrastructure 

Governments always take risks in a country’s infrastructure development. This kind of activity needs proper fund management. This is what investment banks do at their best.

They carry out the studies and manage the fund to generate a good opportunity for the government to promote the infrastructure.

Investment Banks Coordinate Past And Future.

There is a bigger chance that you will get a proper investment idea with investment banks. However, corporate banks are more into the individual capital investment process. But the investment banks are typical in helping the whole government sector of a country in managing the financial aspect and economy of it.

It determines past and present consumption to ensure a better economy for the future.

Related posts

Google to Invest in Go-Jek

Indonesia Expat

How Asia Pulp and Paper Supports Indonesia’s SDGs Through DMPA

Indonesia Expat

Bali Hotels Association Wraps Up 2023 with a Successful Annual General Manager Meeting and Charity Dinner

Indonesia Expat

A Complete Guide to Sports Nutrition Registration in Indonesia

Indonesia Expat

Celebrating the Anniversary of DKI Jakarta, Batavia PIK Officially Opens with a Grand, Colossal Cultural Production

Indonesia Expat

Celebrate 30 Years of Bali’s Distinctive Resort at The Laguna

Indonesia Expat