CEO Noncompete Agreements, Job Risk, and Compensation

Omesh Kini, Ryan Williams, Sirui Yin and David Denis

The Review of Financial Studies, 2021, vol. 34, issue 10, 4701-4744

Abstract: Using hand-collected data on CEO noncompete agreements (NCAs), we find that NCAs are less common when CEOs expect to incur greater personal costs from reduced job mobility and more common when firms expect to suffer greater economic harm if departing CEOs leave to work for a competitor. Additionally, turnover-performance sensitivity is stronger when CEOs have NCAs. Finally, total compensation and incentive pay are higher if CEOs have more enforceable NCAs. Our identification strategy exploits staggered state-level changes in NCA enforceability. Overall, our findings suggest that restrictions on job mobility have important implications for how CEOs are monitored and compensated.

JEL-codes: G30 G32 G34 K22 L22 L25 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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