Mobility Restrictions and Risk-related Agency Conflicts

Abstract: 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.

Link to the seminar:
https://eur-nl.zoom.us/j/95321382013?pwd=TjBnQWVhcWtEVUgrRFhZMDQ0Ui92UT09

Meeting ID: 953 2138 2013

Passcode: please send an email to stolting@ese.eur.nl for the passcode

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