Human Capital Portability and Worker Career Choices: Evidence from M&A Bankers

55 Pages Posted: 23 Nov 2020

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

Yufeng Wu

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: November 3, 2020

Abstract

We quantify the importance of firm-specific human capital in explaining workers' career choices. We develop a model that allows workers to accumulate both portable and non-portable human capital through their work experience and learn about their match quality with current employers over time. We also allow bankers to choose between firms that offer different levels of portability and production efficiency. The model is estimated to match banker career data in the M&A advisory industry, which is populated by bulge bracket and boutique firms. Our estimation suggests that bankers in boutique firms accumulate less portable human capital but enjoy higher efficiency. Such a trade-off explains why bankers are more likely to choose bulge bracket banks at the start of their careers but increasingly migrate to boutique banks when they become more seasoned. We also gauge the extent to which non-portable human capital affects labor allocation and shapes industry structure.

Keywords: labor mobility, human capital portability, career path, M&A advisor

JEL Classification: C51, G24, J60, L22

Suggested Citation

Gao, Janet and Wang, Wenyu and Wu, Yufeng, Human Capital Portability and Worker Career Choices: Evidence from M&A Bankers (November 3, 2020). Available at SSRN: https://ssrn.com/abstract=3724657 or http://dx.doi.org/10.2139/ssrn.3724657

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

Yufeng Wu

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://https://business.illinois.edu/profile/yufeng-wu2/

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