Events

Prof. Ana Albuquerque
Associate Professor of Accounting
Department of Accounting
Boston University Questrom School of Business

We examine how trade secret protections influence CEO turnover by exploiting the staggered rejection of the Inevitable Disclosure Doctrine (IDD) across U.S. states. IDD rejection weakens firms’ ability to prevent executives from joining competitors, thereby expanding CEOs’ outside job opportunities. Contrary to expectations, we find no systematic increase in turnover among high-performing CEOs. Instead, turnover declines significantly among low-performing CEOs following IDD rejection. This effect is strongest in firms with pronounced trade secret exposure and extends to non CEO executives likely privy to proprietary knowledge. Further, we document subsequent deterioration in performance among firms that retain underperforming CEOs, consistent with real economic costs. Our results remain robust to controls for alternative employment frictions, including non compete enforceability. In light of recent developments—namely, the FTC’s attempted ban and subsequent abandonment of a non compete rule—our findings are especially timely: weakening trade secret protections may unintentionally reduce performance based turnover and worsen CEO–firm match quality under contemporary regulatory uncertainty.