Research On The Business Model Of Investment Banking Division At Securities Firms In China

As China’s stock market has been developing rapidly in the past20years, the investment banking division has become important section in securities firms and investment banks in China has formed the business models, which are compatible with the stock market in the mainland of China. However, because of the halt of IPO process since September,2012, the revenue of investment banking division has fallen gradually. On the other hand, as the CSRC(China Securities Regulatory Commission) has put more stricter criterion on IPO reviewing, the previous business models relied by majorities of investment banks in China has been changing hugely in recent years. In particular, the case of investigation on the suspected violations including financial falsification of Wanfu Shengke (Hunan) Agriculture Development Co., Ltd by CSRC has long-term effect on the stock market in China. As the stock market is changing, investment banks in China should adapt their business models strategically.This article focuses on the business models of investment banking division of securities firms and analyzes the historical evolution of investment banks in terms of scale, status and role in the mainland of China. Meanwhile, we synthesize two typical business models:"CITIC Model" and "Guosen Model", which are adopted by most investment banks in China. Furthermore, we analyzes the business model using the five forces model and SWOT methodology in order to provide the most effective path for the business models of investment banks in China. The main conclusion is the small and medium level investment banks should take the "risk management" business models; Large-scale investment banks should take the "revenue management" business models. Finally, we look forward the future development and potential problems of the business models of investment banks in China.