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The Demise of Investment Banking Partnerships: Theory and Evidence

Author

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  • ALAN D. MORRISON
  • WILLIAM J. WILHELM

Abstract

In 1970 the New York Stock Exchange relaxed rules that prohibited the public incorporation of member firms. Investment banking concerns went public in waves, with Goldman Sachs the last of the bulge bracket banks to float. We explain the pattern of investment bank flotations. We argue that partnerships foster the formation of human capital and we use technological advances that undermine the role of human capital to explain the partnership's going‐public decision. We support our theory using a new data set of investment bank partnership statistics.

Suggested Citation

  • Alan D. Morrison & William J. Wilhelm, 2008. "The Demise of Investment Banking Partnerships: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(1), pages 311-350, February.
    • Handle: RePEc:bla:jfinan:v:63:y:2008:i:1:p:311-350
    DOI: 10.1111/j.1540-6261.2008.01317.x
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    Cited by:

    1. Natália Monteiro & Geoff Stewart, 2015. "Scale, Scope and Survival: A Comparison of Cooperative and Capitalist Modes of Production," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(1), pages 91-118, August.
    2. Thanassoulis, John, 2014. "Bank pay caps, bank risk, and macroprudential regulation," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 139-151.
    3. Ozdenoren, Emre & Rubanov, Oleg, 2022. "Profit Sharing and Incentives," International Journal of Industrial Organization, Elsevier, vol. 83(C).
    4. Linus Wilson, 2012. "Financing professional partnerships," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(1), pages 58-92, January.
    5. Arnoud W.A. Boot & Matej Marinč, 2012. "Financial Innovations, Marketability and Stability in Banking," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 22, Edward Elgar Publishing.
    6. Hamid Boustanifar & Everett Grant & Ariell Reshef, 2018. "Wages and Human Capital in Finance: International Evidence, 1970–2011 [Financial reform: what shakes it? What shapes it?]," Review of Finance, European Finance Association, vol. 22(2), pages 699-745.
    7. Alan D. Morrison, 2010. "Knowledge Codification, Institutions And Financial Markets," Manchester School, University of Manchester, vol. 78(s1), pages 1-24, September.
    8. Bhanot, Karan & Kadapakkam, Palani-Rajan, 2022. "Pay for performance, partnership success, and the internal organization of venture capital firms," Journal of Corporate Finance, Elsevier, vol. 75(C).
    9. Kaplan, Steven N. & Rauh, Joshua, 2009. "Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?," Working Papers 229, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    10. Thanassoulis, John & Morrison, Alan, 2017. "Ethical standards and cultural assimilation in financial services," CEPR Discussion Papers 12060, C.E.P.R. Discussion Papers.
    11. Guinnane, Timothy W. & Schneebacher, Jakob, 2020. "Enterprise form: Theory and history," Explorations in Economic History, Elsevier, vol. 76(C).
    12. John Thanassoulis, 2011. "Bankers' Pay Structure And Risk," Economics Series Working Papers 545, University of Oxford, Department of Economics.
    13. John Thanassoulis, 2012. "The Case for Intervening in Bankers’ Pay," Journal of Finance, American Finance Association, vol. 67(3), pages 849-895, June.
    14. Timothy W Guinnane & Susana Mart�nez-Rodr�guez, 2018. "Choice of Enterprise Form: Spain, 1886–1936," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(1), pages 1-26.
    15. Vithanage, Kulunu & Neupane, Suman & Chung, Richard, 2016. "Multiple lead underwriting syndicate and IPO pricing," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 193-208.
    16. Ivashina, Victoria & Lerner, Josh, 2019. "Pay now or pay later? The economics within the private equity partnership," Journal of Financial Economics, Elsevier, vol. 131(1), pages 61-87.
    17. Carruthers Bruce G., 2015. "Isabelle Huault and Christelle Richard: Regulation Writ Large: A Comment on Huault and Richard’ “The Discreet Regulator”," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(2), pages 227-232, July.
    18. Hempel Dominika, 2017. "American Investment Banking in the Context of Great Economic Crises," Studia Historiae Oeconomicae, Sciendo, vol. 35(1), pages 47-60, December.
    19. Manouchehrabadi, Behrang & Letizia, Paolo & Hendrikse, George, 2021. "Governance of collective entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 370-389.
    20. Frédéric Loss & Antoine Renucci, 2020. "Making Partner," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1510-1534, October.
    21. Kedia, Simi & Rajgopal, Shivaram & Zhou, Xing, 2014. "Did going public impair Moody׳s credit ratings?," Journal of Financial Economics, Elsevier, vol. 114(2), pages 293-315.

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