The impact of labor mobility restrictions on managerial actions: Evidence from the mutual fund industry

Abstract

This paper examines how labor mobility restrictions such as non-compete clauses in employment contracts affect the incentives and resulting behavior of employees. Using the investment industry as a testing laboratory, we find that mutual fund managers respond to heightened career concerns due to increased enforceability of non-compete clauses by increasing effort, reducing downside risk, engaging less in tournaments, making their portfolios similar to the portfolios of their benchmarks or peers, and increasing window-dressing. These concerns are, however, moderated by the presence of more developed internal labor markets, which allow managers to substitute restricted across-family mobility with within-family mobility.

Labour marketisation level and corporate labour investment efficiency: Evidence from China

“…As mentioned by Alonso-Carrera and Raurich (2018), because of the constrained mobility of labour and other production factors, wages and capital intensity are not equal across the agricultural and non-agricultural sectors, and such inequality causes GDP loss. Cici et al (2021) mention that although preventing employees from transferring or leaking intellectual skills and property to rival companies can protect trade secrets and thereby encourage innovation, such restrictions limit the labour market pool from which companies can hire labourers. At the same time, other studies show that the adoption of trade secrets protection regulations, such as the inevitable disclosure doctrine (IDD), can cause a significant decrease in labour mobility (Png & Samila, 2015).…”