Working Papers

Talent Flight as a Run on the Firm

A Study of Post-Merger Integration at the Dewey-LeBeouf Law Firm


Although collective turnover is widespread, its consequences have seldom been studied. We focus on an extreme case – collective turnover after a merger between privately held firms, and argue that a cascade of exits triggers a loss of confidence in the firm, leading to subsequent exits. We show that it is not the loss of proficient talent that is a key signal of the loss of confidence, instead, it is the polarization of exits between the employees of the acquiring and acquired firm that signals uncertainty and jumpstarts other exits. We suggest that the momentum of ‘news’ after a merger affects confidence in the firm, and distinguish between the momentum of ‘bad news’ and the momentum of ‘good news. We find that the momentum of bad news intensifies the effect of polarization in prior exits.