CEO Non-Compete Agreements, Job Risk, and Compensation

The Review of Financial Studies

87 Pages Posted: 13 May 2018 Last revised: 26 May 2020

See all articles by Omesh Kini

Omesh Kini

Georgia State University

Ryan Williams

University of Arizona - Department of Finance

David Yin

Miami University of Ohio

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2020

Abstract

Using hand-collected data on chief executive officer (CEO) non-compete agreements (NCAs), we find that NCAs are less likely when CEOs expect to incur greater personal costs from reduced job mobility and more likely when firms expect to suffer greater economic harm if departing CEOs work for competitors. Additionally, turnover–performance sensitivity is stronger when CEOs have NCAs. Finally, total compensation and incentive pay are higher if CEOs have more enforceable NCAs. Our identification strategy exploits staggered state-level changes in NCA enforceability. Overall, our findings suggest that restrictions on job mobility have important implications for how CEOs are monitored and compensated.

Keywords: CEO Non-Compete Contracts; CEO Mobility, CEO Performance-Turnover Sensitivity; CEO Pay; CEO Compensation Structure

JEL Classification: G30, G32, G34, K22, L22, L25

Suggested Citation

Kini, Omesh and Williams, Ryan and Yin, David, CEO Non-Compete Agreements, Job Risk, and Compensation (May 20, 2020). The Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=3170804 or http://dx.doi.org/10.2139/ssrn.3170804

Omesh Kini

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

Ryan Williams (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

David Yin

Miami University of Ohio ( email )

Oxford, OH 45056
United States

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