Human Capital Driven Acquisition: Evidence from the Inevitable Disclosure Doctrine

74 Pages Posted: 11 Jan 2016 Last revised: 10 Aug 2018

See all articles by Deqiu Chen

Deqiu Chen

University of International Business and Economics (UIBE) - Business School

Huasheng Gao

Fanhai International School of Finance, Fudan University

Yujing Ma

Business School, University of International Business and Economics

Date Written: August 9, 2018

Abstract

We present evidence that the desire to gain human capital is an important motive for corporate acquisitions. Our tests exploit the staggered recognition of the Inevitable Disclosure Doctrine by U.S. state courts, which prevents a firm’s employees from working for other firms. We find a significant increase in the likelihood of being acquired for firms headquartered in states that recognize such a doctrine relative to firms headquartered in states that do not. Our result is stronger for firms with greater human capital and for firms whose employees have better ex-ante employment mobility.

Keywords: Acquisition, Human Capital, Labor Market Friction, Inevitable Disclosure Doctrine

JEL Classification: G34, J24, J62, M51, M54

Suggested Citation

Chen, Deqiu and Gao, Huasheng and Ma, Yujing, Human Capital Driven Acquisition: Evidence from the Inevitable Disclosure Doctrine (August 9, 2018). Available at SSRN: https://ssrn.com/abstract=2713600 or http://dx.doi.org/10.2139/ssrn.2713600

Deqiu Chen

University of International Business and Economics (UIBE) - Business School ( email )

Beijing
China

Huasheng Gao

Fanhai International School of Finance, Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China
2165642222 (Phone)
2165642222 (Fax)

Yujing Ma (Contact Author)

Business School, University of International Business and Economics ( email )

425 Ning Yuan Building,10 Hui Xin Dong Jie
Beijing, Beijing 100000
China

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