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

59 Pages Posted: 12 Dec 2019 Last revised: 9 Sep 2021

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

Indiana University Kelley School of Business; European Corporate Governance Institute (ECGI); China Academy of Financial Research (CAFR)

Date Written: March 9, 2021

Abstract

We study the comparative advantage of 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, particularly when facing cross-subsidization inside bulge bracket (multidivisional) banks, proxied by poor performance of their non-M&A departments. Such skilled labor migration improves the performance of boutique banks, 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 corporate organizational structure and labor migration can jointly shape industry dynamics.

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

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 (March 9, 2021). 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

Indiana University Kelley School of Business ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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

China Academy of Financial Research (CAFR)

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

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