Labor Mobility and Antitakeover Provisions

53 Pages Posted: 24 Apr 2018 Last revised: 26 Jan 2021

See all articles by Aiyesha Dey

Aiyesha Dey

Harvard Business School

Joshua T. White

Vanderbilt University - Finance

Date Written: January 16, 2021


How do firms protect their human capital? We test whether firms facing an increased threat of being acquired strengthen their antitakeover provisions (ATPs) in order to bond with their employees. We use the adoption of the Inevitable Disclosure Doctrine (IDD) by US state courts, which exogenously decreases knowledge-worker mobility, thus elevating takeover risk and reducing employee incentives to innovate. Firms respond to IDD adoption by strengthening ATPs that defend against hostile takeovers, especially when they have greater ex-ante employee mobility and human capital and place greater importance on employee relations. We find no evidence that managers strengthen ATPs for entrenchment or takeover bargaining purposes in this setting. Our findings show that ATPs can be used to credibly commit to employees in order to protect long-term value creation.

Keywords: Corporate governance, antitakeover provisions, labor mobility, implicit contracting, employee bonding, stakeholders

JEL Classification: G34, G38, J60, K22, L14

Suggested Citation

Dey, Aiyesha and White, Joshua T., Labor Mobility and Antitakeover Provisions (January 16, 2021). Journal of Accounting & Economics (JAE), Forthcoming, Harvard Business School Accounting & Management Unit Paper No. 19-102, Vanderbilt Owen Graduate School of Management Research Paper No. 3161661, Finance Down Under 2019 Building on the Best from the Cellars of Finance, Available at SSRN: or

Aiyesha Dey

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Joshua T. White (Contact Author)

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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