Enforcement of Non-Compete Agreements, Outside Employment Opportunities, and Insider Trading

• 成果类型: Article
• 署名作者: Gao, Bo; Guo, Feng; Lisic, Ling Lei; Omer, Thomas
• 署名单位: University of Texas System; University of Texas El Paso; Iowa State University; Virginia Polytechnic Institute & State University; University of Nebraska System; University of Nebraska Lincoln
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12842
• 发表日期: 2023
• 页码: 1250-1279
• 关键词: CORPORATE GOVERNANCE; mobility; LITIGATION; trades; profitability; restrictions; INFORMATION; KNOWLEDGE; turnover; RISK

摘要

Enforcement of non-compete agreements could affect executives' and directors' incentives to profit from their information advantage. This is because excessive trading profits could result in job termination, which would trigger the restrictions imposed by the non-compete agreements. We find that executives' and directors' insider trading profits from sales are lower for companies headquartered in states with greater enforcement of non-compete agreements. The path analyses suggest that high enforcement of non-compete agreements disincentivizes managers to profit from their information advantage to avoid the possibility of job termination and the cost of job terminations. We also find that insiders in companies headquartered in states with greater enforcement of non-compete agreements are less likely to exploit their information advantage by timing their sales before unfavorable corporate earnings announcements. The results suggest that enforcement of non-compete agreements reduces executives' and directors' incentives by imposing costs on future outside employment opportunities.