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CR- Analysts of Investment banks

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New post 25 Apr 2007, 10:30
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A
B
C
D
E

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Guys,

Could you try the CR below? Please explain your answer.

Q40. 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 companiesтАЩ 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 bankтАЩs analysts on the basis of recommendations made by managers who are solely engaged in raising capital for clients
B. Using reports by the investment bankтАЩs 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 analystsтАЩ current predictions about how companies will perform financially, in order to determine the value of future predictions
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New post 25 Apr 2007, 10:45
i pick D.

Javed.

Cheers!
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New post 25 Apr 2007, 11:25
A - analysts and bankers should be separated in order to avoid biased decisions that may hinder the achievement of the long-term success.
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New post 25 Apr 2007, 11:28
I will go with B
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New post 26 Apr 2007, 05:22
I think its C...sharing of unfavorable reports with other investment banks will prevent the main bank to get good advantageous contracts.
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New post 26 Apr 2007, 08:58
A.
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New post 26 Apr 2007, 10:44
A. Evaluating and rewarding the bankтАЩs analysts on the basis of recommendations made by managers who are solely engaged in raising capital for clients
- Managers would recommend only the analysts who send out favorable reports for their clients. That would affect the long-term success of the investment bank, even though the bank may be able to raise more money in the short run. My choice.
B. Using reports by the investment bankтАЩs analysts to determine how best to raise capital for a client
- certainly better. The bank will be searching from a worst case scenario.
C. Sharing the task of raising capital for a client with other investment banks
- makes it easier for the bank to meet its goals, while performing an unbiased analysis
D. Ensuring that conflicts between analysts and those who raise capital for clients are carefully mediated and resolved by impartial arbitrators
- no doubt that will help.
E. Monitoring the success or failure of analystsтАЩ current predictions about how companies will perform financially, in order to determine the value of future predictions
- certainly helpful

A for me.

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New post 26 Apr 2007, 13:09
Guys,

Thank you all for your explanations.

The Referenced (Not official ) key is A.
  [#permalink] 26 Apr 2007, 13:09
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