This paper examines the impact of job changes by prominent investment bankers on the M&A and equity market shares of investment banks. Using a hand-collected sample of job changes between 1998 and 2006, we find that after controlling for deal and bank-level characteristics, hiring a banker from an investment bank with a more prominent industry presence has a positive impact on both equity and M&A market share for the gaining bank and a negative impact on the losing bank's M&A market share. After the banker switches firms, we find a significant amount of business following the banker from the losing bank to the gaining bank, particularly when the relationship is strong between the client firm and the banker. Abnormal returns around the announcement of a banker changing employers are positive and significant for the gaining bank, suggesting that the market views banker additions as value increasing. Overall, our results suggest human capital is a critical component of investment banking deal flow.
Bibliographical noteFunding Information:
We thank Samuel Bulmash, Jack Cooney, Tyler Henry, Delroy Hunter, Bill Johnson, Beverly Marshall, Rajesh Narayanan, Jeff Netter, Jay Ritter, Ninon Sutton, Larry Wall, Lei Wedge, Donghang Zhang and seminar participants at the 2008 Financial Management Association and 2008 Eastern Finance Association conferences, the University of Georgia, Virginia Tech, and the University of South Florida for helpful comments. This work was supported by the Hongik University new faculty research support fund. We are responsible for all remaining errors.
- Deal flow
- Investment banking
- Market share