Misconduct Synergies from Mergers

Like many sectors in the U.S. economy, the registered investment advisory (RIA) industry has seen a recent increase in consolidation through mergers and acquisitions (M&A). The RIA industry has also experienced widespread and well-documented misconduct among employees.  For example, Egan, Matvos and Seru (2019) report that 7 percent of financial advisors have misconduct records.  Beyond the traditional cost and revenue synergies, what is the potential impact of M&A transactions on employee behavior? Mergers can increase value if they improve monitoring and disciplinary mechanisms that reduce employee wrongdoing at the combined firm.

In a new paper, we use the RIA industry … Read more