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

99 Pages Posted: 12 Dec 2019 Last revised: 18 Jul 2023

See all articles by Janet Gao

Janet Gao

McDonough School of Business

Wenyu Wang

Indiana University - Kelley School of Business - Department of Finance

Xiaoyun Yu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR)

Date Written: July 17, 2023

Abstract

We study the comparative advantage of firms with focused and multidivisional organizational forms at attracting valuable human capital. Using the M&A advisory industry as a laboratory, we show that high-performing individuals are more likely to migrate to boutique (focused) banks, especially those who are still on the upward trajectory of their career. Such migration is amplified by the cross-subsidization inside bulge bracket (multidivisional) firms, proxied by poor performance of their non-M&A departments. The transition of skilled labor improves the performance of the boutique sector, potentially contributing to the rise of boutiques over the past two decades. Moreover, M&A deal outcomes differ when having boutique advisors. Our findings suggest that corporate organizational structure and labor migration can jointly shape industry dynamics.

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

JEL Classification: G24, G34, J24, J62

Suggested Citation

Gao, Janet and Wang, Wenyu and Yu, Xiaoyun, Big Fish in Small Ponds: Human Capital Migration and the Rise of Boutique Banks (July 17, 2023). Available at SSRN: https://ssrn.com/abstract=3496076 or http://dx.doi.org/10.2139/ssrn.3496076

Janet Gao

McDonough School of Business ( email )

Washington, DC 20057
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

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

European Corporate Governance Institute (ECGI) ( email )

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

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

China Academy of Financial Research (CAFR)

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

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