Human Capital Portability and Careers in Finance

Abstract

How does firm-specific human capital shape careers in the finance industry? We build a dynamic model where workers accumulate portable and non-portable (firm-specific) human capital and learn about their match quality with employers. Estimating the model using granular data on M&A advisory bankers, we show that a large fraction of bankers’ human capital is non-portable, ranging from 12% to 46% across different types of firms. Bankers make dynamic tradeoff between portability and returns on human capital, leading to time-varying job preferences over their life cycle. Our results have broad implications for careers in finance and the provision of financial services.

Keywords: firm-specific human capital, M&A bankers, structural estimation, learning-by-doing, career in Finance

JEL Classification: J20, J24, J44, J63, G24, G34