Conflicting incentives: How the inevitable disclosure doctrine disparately influences disclosure

Thomas Bates, Bryan Lim, Jordan Neyland and Yolanda Yulong Wang ()
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Thomas Bates: ASU - Arizona State University [Tempe]
Bryan Lim: University of Melbourne
Jordan Neyland: Bentley University
Yolanda Yulong Wang: Audencia Business School

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Abstract: The Inevitable Disclosure Doctrine ("IDD") protects trade secrets and intellectual property but restricts labor mobility by limiting a worker's ability to take jobs at competing firms. Prior literature presents evidence of a causal relationship between the adoption of the IDD and earnings manipulation, as executives have less of a need to demonstrate superior performance to attract and retain employees. At the same time, however, the IDD traps executives in their roles, increasing their personal incentive to manage earnings defensively. We present evidence that executive incentives mitigate the desire to reduce earnings management in firms with lower knowledge-worker turnover after adopting the IDD, suggesting a more nuanced understanding of the relation between labor market mobility and accounting disclosure than has previously been documented.

Keywords: Corporate Governance; Trade Secret Risk; Key Employee Risk; Corporate Misconduct; Labor Mobility; Non-Compete Protections; Corporate Misconduct IDD Key Employee Risk Trade Secret Risk; Non-Compete Protections Labor Mobility Corporate Governance; Trade secret risk; Key employee risk; IDD; Corporate misconduct; Corporate governance; Labor mobility; Non-compete protections (search for similar items in EconPapers)
Date: 2026-09
Note: View the original document on HAL open archive server: https://hal.science/hal-05741172v1
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Published in Journal of Corporate Finance, 2026, 101, pp.103067. ⟨10.1016/j.jcorpfin.2026.103067⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05741172

DOI: 10.1016/j.jcorpfin.2026.103067

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