Traders vs. Relationship Managers: Reputational Conflicts in Full-Service Investment Banks

55 Pages Posted: 21 Dec 2012 Last revised: 24 Oct 2013

See all articles by Zhaohui Chen

Zhaohui Chen

University of Virginia - McIntire School of Commerce

Alan D. Morrison

University of Oxford - Said Business School; University of Oxford - Merton College

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Date Written: October 20, 2013

Abstract

We present a model that explains why investment bankers struggle to manage conflicts of interest. Banks can build a type reputation for technical competence by performing complex deals that may not serve their clients' interest; on the other hand, banks can sustain a behavioral reputation by refraining from doing so. A behavioral reputation is a luxury reserved for banks that have proven their abilities. The model sheds light on conflicts between the trading and advisory divisions of investment banks, as well as the consequences of technological change for time variation in the relative strength of behavioral- and type-reputation concerns.

Keywords: reputation, investment banking, conflicts of interest

Suggested Citation

Chen, Zhaohui and Morrison, Alan and Wilhelm, William J., Traders vs. Relationship Managers: Reputational Conflicts in Full-Service Investment Banks (October 20, 2013). Available at SSRN: https://ssrn.com/abstract=2192098 or http://dx.doi.org/10.2139/ssrn.2192098

Zhaohui Chen (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-243-1188 (Phone)

Alan Morrison

University of Oxford - Said Business School ( email )

Department of Finance
Park End Street
Oxford OX1 1HP
United Kingdom
+44 18 6527 6343 (Phone)
+44 18 6527 6310 (Fax)

University of Oxford - Merton College

Merton Street
Oxford OX1 4JD
United Kingdom
+44 18 6527 6343 (Phone)

William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

Rouss & Robertson Halls, East Lawn
P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-924-7666 (Phone)
434-924-7074 (Fax)

HOME PAGE: http://gates.comm.virginia.edu/wjw9a/

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