The Demise of Investment Banking Partnerships: Theory and Evidence

47 Pages Posted: 2 Jun 2005

See all articles by Alan D. Morrison

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: February 2005

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. In our model, partnerships have a role 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: Going-public decision, partnership, human capital, collective reputation, investment bank

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

Suggested Citation

Morrison, Alan and Wilhelm, William J., The Demise of Investment Banking Partnerships: Theory and Evidence (February 2005). CEPR Discussion Paper No. 4904. Available at SSRN: https://ssrn.com/abstract=734387

Alan Morrison (Contact Author)

University of Oxford - Said Business School ( email )

Department of Finance
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+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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