Restrictions on CEO Mobility, Performance-Turnover Sensitivity, and Compensation: Evidence from Non-Compete Agreements
63 Pages Posted: 30 May 2018
Date Written: May 29, 2018
Using hand-collected data on CEO non-compete agreements (NCAs), we find that CEOs are less likely to have NCAs when they face greater employment risk and more likely when firms expect to suffer greater harm if departing CEOs work with competitors in some capacity. Additionally, we find that the performance-turnover sensitivity is significantly stronger when CEOs have NCAs. Finally, we find that total compensation and incentive pay are higher if CEOs have enforceable NCAs. Our identification strategy exploits staggered state-level changes in NCA enforceability. Our findings suggest that restrictions on mobility have important implications for how boards monitor and compensate CEOs.
Keywords: CEO Non-Compete Contracts, CEO Mobility, CEO Performance-Turnover Sensitivity, CEO Pay, CEO Compensation Structure
JEL Classification: G30, G32, G34, K22, L22, L25
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