Working for the Enemy? The Impact of Investment Bankers on Deal Flow

36 Pages Posted: 21 Feb 2008 Last revised: 26 Oct 2015

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Hyung-Suk Choi

Hongik University

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Date Written: February 4, 2009

Abstract

This paper examines the impact of investment banker job changes on the M&A and equity market shares of investment banks. Using a unique sample of job changes between 1998 and 2004, we find, on average, that the bank losing the banker experiences a negative and significant decrease in its industry market share while the gaining bank's market share doesn't change significantly. However, after controlling for deal and bank-level characteristics, hiring a banker from an investment bank with a more prominent industry presence has a positive impact on both equity and M&A market share for the gaining bank and a negative impact on the losing bank's M&A market share. After the banker switches firms, we find a significant amount of business follows the banker from the losing bank to the gaining bank. Pooled and paired wealth effects around the announcement of a switch for gaining and losing banks are positive and significant, suggesting the market views banker additions as value increasing. Overall, our results suggest human capital is a critical component of investment banking deal flow.

Keywords: underwriter reputation, human capital, investment banking, investment bankers

JEL Classification: G24

Suggested Citation

Bradley, Daniel and Choi, Hyung Suk and Clarke, Jonathan, Working for the Enemy? The Impact of Investment Bankers on Deal Flow (February 4, 2009). Available at SSRN: https://ssrn.com/abstract=1095305 or http://dx.doi.org/10.2139/ssrn.1095305

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Hyung Suk Choi

Hongik University ( email )

72-1, Sangsu-dong Mapo-gu
Seoul, 121-791
Korea

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

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