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Investment banks often have conflicting roles. They [#permalink]
11 Dec 2006, 13:37
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Investment banks often have conflicting roles. They sometimes act for a client company
by raising capital from other investment institutions as advantageously as possible, but
their analysts also sometimes send unfavorable reports on the financial health of
companies for whom they are raising capital to other clients who wish to make
investments. Analyses of companiesâ€™ financial health need to be unbiased if an
investment bank is to achieve long-term success.
If the statements above are true, which of the following practices, if adopted by an
investment bank, would hinder its long-term success?
A. Evaluating and rewarding the bankâ€™s analysts on the basis of recommendations
made by managers who are solely engaged in raising capital for clients
B. Using reports by the investment bankâ€™s analysts to determine how best to raise
capital for a client
C. Sharing the task of raising capital for a client with other investment banks
D. Ensuring that conflicts between analysts and those who raise capital for clients are
carefully mediated and resolved by impartial arbitrators
E. Monitoring the success or failure of analystsâ€™ current predictions about how
companies will perform financially, in order to determine the value of future