Amanda Cowen
DBA in Policy and Management
Dissertation Chair: Prof. P. Healy
The Liabilities of Status: Merger Outcomes in the Investment Banking Industry, 1980-2000
My dissertation consists of three essays that extend the literature on status dynamics and consequences. Prior sociology research has established that in exchange relationships status is transferred from the higher status actor to the lower status one. As a result affiliation patterns are characterized by status homophily-the tendency for relationships to form between actors of similar status. However, in my first two essays, I argue that when relationships require integration that actors will actually be made worse off by pursuing status homophily. Status differences act as a deference signal; when this signal is absent disputes are apt to arise because it is unclear which party can legitimately assume control of integration decisions. Control disputes are even more detrimental in the context of high status actors because they are especially resistant to the changes brought about by integration. I test my theory using a sample of investment banking firms that participated in merger activities during the period 1980-2000. While my findings support the status transfer mechanism documented in earlier research, I also show that merger partnerships characterized by status similarity and high total status are associated with worse status outcomes for firms because they lead to integration control struggles. The implication is that high status firms face difficult tradeoffs in the selection of a merger partner. As they seek to minimize the status erosion attributable to merging with an inferior partner, they instead face status decline stemming from contentious integration management. My final essay looks at an important consequence of status in the investment banking industry-its role in mitigating conflicts of interest.
