Employee Mobility, Noncompete Agreements, Product-Market Competition, and Company Disclosure

84 Pages Posted: 18 Jul 2017 Last revised: 23 Aug 2017

Date Written: June 30, 2017


This study explores the impact on companies’ disclosures of U.S. states’ different propensities to enforce noncompete agreements. I find a negative association between a state’s enforcement of noncompete agreements and disclosure activities of firms headquartered in that state. Companies that face local rivals drive some results. Analyses that focus on several state-level changes in enforcement level of noncompete agreements confirm this association. Overall, the findings are consistent with a higher enforcement of noncompete agreements increasing proprietary costs of disclosure, because companies in high-enforcement settings are less informed about each other due to reduced information leakage from employee transfers across competitors. The results suggest that the overall environment for information spillovers surrounding a firm impacts its degree of disclosure to the capital markets and that state-specific enforcement of noncompete agreements can be used as a novel measure of the proprietary costs of disclosure.

Keywords: Employee Mobility, Disclosure, Noncompete Agreements, Proprietary Costs

JEL Classification: M41, K31, J62, M55

Suggested Citation

Aobdia, Daniel, Employee Mobility, Noncompete Agreements, Product-Market Competition, and Company Disclosure (June 30, 2017). Review of Accounting Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3001883 or http://dx.doi.org/10.2139/ssrn.3001883

Daniel Aobdia (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

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