Human Capital Driven Acquisition: Evidence from the Inevitable Disclosure Doctrine
74 Pages Posted: 11 Jan 2016 Last revised: 10 Aug 2018
Date Written: August 9, 2018
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
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