Investment banking constitutes a subset of a bank or financial institution responsible for providing specialized services to governments, corporations, and institutions. These services include underwriting, mergers and acquisitions, and financial advisory services.

A fundamental function of investment banks is to facilitate capital funding. They assist corporations and government entities in securing buyers and investors for their stocks or bonds, particularly evident during initial public offerings (IPOs) when a company offers stock shares to investors for the first time. In this scenario, the investment bank manages the IPO process by purchasing most or all of the shares from the company and subsequently selling them to the market on its behalf, alleviating the company's burden of handling the IPO directly.

During an IPO, investment banks also create a prospectus detailing the company and the stock offering terms. Additionally, they manage legal and compliance matters with relevant financial regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC). Furthermore, investment banks set the initial stock price to attract sufficient investment for the company to secure the needed financing.

Investment banks also play essential roles in mergers and acquisitions (M&A). They conduct valuations to determine the worth of a company being offered for sale. They also provide expert advisory services to companies interested in making acquisitions, advising on optimal bidding prices, and structuring offers favorably.