Mobility Restrictions and Risk-Related Agency Conflicts

78 Pages Posted: 3 Mar 2020 Last revised: 29 Apr 2022

See all articles by Emdad Islam

Emdad Islam

Monash University

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Lubna Rahman

Monash University

Date Written: September 5, 2020


Stricter enforcement of post-employment restrictions that strengthens trade secrets protection also limits CEOs’ alternative employment opportunities. We find that such mobility restrictions, which heightened CEO career concerns can dampen their risk-taking incentives and distort corporate financing decisions, particularly in firms whose CEOs value outside employment opportunities relatively highly. Stock market reactions to acquisition announcements suggest that intensified CEO career concerns from mobility restrictions compromise the quality of investment decisions. More generally, managerial career concerns adversely affect shareholder value by exacerbating risk-related agency conflicts. Thus, our evidence suggests that shareholders can benefit from more unconstrained labor markets that promote managerial risk-taking.

Keywords: Career Concerns, Risk-Related Agency Conflicts, Leverage, Acquisitions

JEL Classification: G32, G34, J24, J61, K31

Suggested Citation

Islam, Emdad and Masulis, Ronald W. and Rahman, Lubna, Mobility Restrictions and Risk-Related Agency Conflicts (September 5, 2020). European Corporate Governance Institute – Finance Working Paper No. 665/2020, Available at SSRN: or

Emdad Islam

Monash University ( email )

Wellington Road
Clayton, Victoria 3168

Ronald W. Masulis (Contact Author)

University of New South Wales, Sydney ( email )

UNSW Business School
High St
Sydney, NSW 2052
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592

Lubna Rahman

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800

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