The Demise of Investment-Banking Partnerships: Theory and Evidence

Oxford Financial Research Centre Working Paper

AFA 2006 Boston Meetings Paper

38 Pages Posted: 18 Oct 2005  

Alan D. Morrison

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

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 2 versions of this paper

Date Written: July 2004

Abstract

Until 1970, the New York Stock Exchange prohibited public incorporation of member firms. After the rules were relaxed to allow joint stock firm membership, investment-banking concerns organized as partnerships or closely-held private corporations went public in waves, with Goldman Sachs (1999) the last of the bulge bracket banks to float. In this paper we ask why the Investment Banks chose to float after 1970, and why they did so in waves. Our explanation extends previous work which examined the role of partnerships in fostering the formation of human capital (Morrison and Wilhelm, 2003). We examine in this context the effect of technological innovations which serve to replace or to undermine the role of the human capitalist and hence we provide a technological theory of the partnership's going-public decision. We support our theory with a new dataset of investment bank partnership statistics.

Keywords: Partnership, human capital, collective reputation, investment bank, going-public decision

JEL Classification: G24, G32, J24, J41, L14, L22

Suggested Citation

Morrison, Alan D. and Wilhelm, William J., The Demise of Investment-Banking Partnerships: Theory and Evidence (July 2004). Oxford Financial Research Centre Working Paper; AFA 2006 Boston Meetings Paper. Available at SSRN: https://ssrn.com/abstract=569109 or http://dx.doi.org/10.2139/ssrn.569109

Alan Morrison (Contact Author)

University of Oxford - Said Business School ( email )

Department of Finance
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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 )

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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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