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

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