Employee Mobility, Noncompete Agreements, Product-Market Competition, and Company Disclosure
84 Pages Posted: 18 Jul 2017 Last revised: 23 Aug 2017
Date Written: June 30, 2017
This study explores the impact on companies’ disclosures of U.S. states’ different propensities to enforce noncompete agreements. I find a negative association between a state’s enforcement of noncompete agreements and disclosure activities of firms headquartered in that state. Companies that face local rivals drive some results. Analyses that focus on several state-level changes in enforcement level of noncompete agreements confirm this association. Overall, the findings are consistent with a higher enforcement of noncompete agreements increasing proprietary costs of disclosure, because companies in high-enforcement settings are less informed about each other due to reduced information leakage from employee transfers across competitors. The results suggest that the overall environment for information spillovers surrounding a firm impacts its degree of disclosure to the capital markets and that state-specific enforcement of noncompete agreements can be used as a novel measure of the proprietary costs of disclosure.
Keywords: Employee Mobility, Disclosure, Noncompete Agreements, Proprietary Costs
JEL Classification: M41, K31, J62, M55
Suggested Citation: Suggested Citation