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    Trade Secrets Protection and Antitakeover Provisions
    10 Apr 2019Working Paper Summaries

    Trade Secrets Protection and Antitakeover Provisions

    by Aiyesha Dey and Joshua White
    The study examines managers’ responses when facing an increased threat of their firm being acquired. Results add to our knowledge of the use of antitakeover provisions, showing that managers, particularly in high-innovation firms, increase certain provisions to protect long-term innovation output in the presence of elevated acquisition risk.
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    Author Abstract

    We examine whether and why managers strengthen antitakeover provisions when facing an increased threat of being acquired. Our tests exploit the Inevitable Disclosure Doctrine (IDD), which exogenously decreases knowledge-worker mobility, thereby increasing firms’ likelihood of being acquired. Managers respond by increasing specific antitakeover provisions, especially when employees have greater ex-ante mobility. Firms that strengthen antitakeovers experience a reduced takeover likelihood. Cross-sectional tests indicate that firms with higher innovative activity increase antitakeovers more after IDD, and those that do, experience greater ex-post innovation outcomes. Our results are consistent with managers increasing antitakeovers to protect long-term innovation output rather than for private benefits.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: March 2019
    • HBS Working Paper Number: HBS Working Paper #19-102
    • Faculty Unit(s): Accounting and Management
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    Aiyesha Dey
    Aiyesha Dey
    Høegh Family Associate Professor of Business of Administration
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