Big Fish in Small Ponds: Human Capital Mobility and the Rise of Boutique Banks

71 Pages Posted: 12 Dec 2019 Last revised: 10 Mar 2021

See all articles by Janet Gao

Janet Gao

Indiana University - Kelley School of Business

Wenyu Wang

Indiana University - Kelley School of Business - Department of Finance

Xiaoyun Yu

Indiana University Kelley School of Business; European Corporate Governance Institute (ECGI); China Academy of Financial Research (CAFR)

Date Written: March 9, 2021

Abstract

We document a rise of boutique banks in the M&A advisory industry that is traditionally dominated by bulge bracket banks. Using novel data on banker career paths, we show that high-performing individuals are more likely to migrate to boutique banks, and their clients and colleagues tend to follow. The performance of gaining banks in the transitioning bankers’ specialized industries subsequently improves, potentially contributing to the prosperity of boutique advisors. To establish causality, we exploit the cross-department subsidization within bulge bracket banks that exogenously affects skilled labor supply to boutique advisors. Our findings highlight how human capital mobility shapes industry structures.

Keywords: Investment Bank, Mobility of Human Capital, Mergers and Acquisitions

JEL Classification: G24, G34, J24, J62

Suggested Citation

Gao, Janet and Wang, Wenyu and Yu, Xiaoyun, Big Fish in Small Ponds: Human Capital Mobility and the Rise of Boutique Banks (March 9, 2021). Available at SSRN: https://ssrn.com/abstract=3496076 or http://dx.doi.org/10.2139/ssrn.3496076

Janet Gao

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

Wenyu Wang (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Xiaoyun Yu

Indiana University Kelley School of Business ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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