Tuesday, September 16, 2014

Wall Street's Favorite Business Schools

This is not an assessment of the ranking of business schools, although such rankings tend to be unveiled this time of the year when fall classes start.  This is about the MBA programs that tend to send large numbers of graduates into coveted positions in investment banking, corporate banking, sales & trading, capital markets, and equity research.

This is less about the schools' efforts to channel and push MBA students into certain directions.  For the most part, they don't.  Business schools don't shove students into banking and finance, although there are implied messages (based, for example, on the resources the school might devote to finance, finance instruction, and career-advisory services in finance).  Business schools certainly don't ignore benefactors, including sponsors that will include large banks and private-equity firms or alumni holding senior positions in finance. And schools do their best to cultivate close relationships with top institutions.

Business schools, for their part, facilitate a pathway into banking and finance, if large numbers of students prefer to go in that direction.

This is more about the major financial institutions and where they go to fill up the first-year slots in banking and finance.  What are the favorite schools (including those with ties to the Consortium) and why?

The careers website eFinancial Careers updated its list this month. It tries to list schools based on a calculated index, which of course will inevitably be biased or flawed. It acknowledges that.  But the exercise presents a valid picture.  It can tell MBA students and graduates from where major financial institutions (from Morgan Stanley to BNP Paribas) hire business-school graduates in financial centers in the U.S. and Europe. In other words, what are the top "target" schools, not necessarily the best schools, but the top schools where they have had success in steering graduates toward major positions in finance?

Some of that success is due to aggressive efforts by the financial institutions, including their recruiting programs and the relationships they establish and nurture at certain schools.  A lot of that success is influenced by the alumni employed at the bank or firm.  If a large number of senior and influential bankers at a certain bank went to Michigan-Ross, then it is likely the bank will continue to maintain a meaningful relationship that results in a high-frequency recruiting pipeline.  Another factor is the institution inferring that if past graduates of the school have performed well, then the bank should go back and get more of them.

This latest list includes the typical business schools known for corporate finance and investment management and for sending dozens of graduates to Wall Street every year. That includes Penn-Wharton, Columbia, and Chicago-Booth.  The list of 35 includes at least seven Consortium schools:  Yale, Cornell-Johnson, Dartmouth-Tuck, UCLA-Anderson, Michigan-Ross, NYU-Stern and Carnegie Mellon-Tepper.

But the list includes some surprises and perhaps some notable omissions.

Yale SOM, a Consortium school, with its history and tradition in general management and public administration, is third on the list.  The list suggests it is a more popular target among major banks than Harvard, Chicago or MIT--at least based on percentages and the school's success in its graduating landing the best banking positions.

Stanford is no. 8 on this list, even if the more popular notion is that its graduates tend to prefer entrepreneurship and technology. We don't observe many of its graduates heading to the East Coast to work for Citi or Deutsche Bank, but the school has an advantage in residing next door to some of the country's top venture-capital firms. The venture firms, if they choose to, can manage an open-door relationship with the business school just across the road.

Rice-Jones in Houston appears high on the list (14th), higher than even Michigan-Ross, Duke and Dartmouth, despite the well-documented record that Tuck sends large numbers into prominent slots at the top banks and finance firms.  And most would have thought that Texas, another Consortium school in Rice's region, which doesn't appear on the list, would be a more attractive finance target than Rice. 

Virginia-Darden and Indiana-Kelley, Consortium schools with prominent programs and graduates in finance, are not on the list.  Regional preferences among its graduates may explain that.  eFinancial doesn't claim to offer a perfect or a fair list. It reminds list-users that it attempts to capture what appears to be favorite target schools among favorite target banks.

Critics might dismiss one impactful bias about the list.  It opts to divide financial institutions into three tiers and gives more credit to schools with graduates who go to work at the top-tier banks (Goldman Sachs, Citi, JPMorgan, e.g.).  It, therefore, penalizes, schools with large numbers of alumni who work at such institutions as Credit Suisse, Barclays, RBS, Regions Financial, US Bancorp, Sun Trust, HSBC (not regarded as top-tier by these list-preparers) or work at the prominent boutique firms that, in some tallies, have seized some market share from the bulge-brackets.

Remember, this is a list, one that will be out-dated by next summer and one, like all others, should be examined with caution.  While it may be true that Bank of America and JPMorgan enjoy recruiting large numbers from NYU for corporate-finance roles, it doesn't mean a graduate from UNC-Kenan Flagler or Emory-Goizueta won't have a chance to gain an offer.

Tracy Williams

See also:
CFN: Who Are the Most Satisfied Business School Alumni? 2011
CFN:Yet Another Ranking of Business Schools?  2010
CFN:  Be Cautious with Business-School Rankings, 2009
CFN: UCLA--Going Out on Its Own? 2011
CFN:  Yale SOM Gets a New Look, 2014
CFN:  Georgetown Becomes the Consortium's Newest School, 2013 


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