Joint Meeting of the Mid-Atlantic and Northeast Regions

Inalienable Human Capital and Inevitable Corporate Payouts

• In Event: Corporate Governance

Abstract

We highlight that the inalienable nature of human capital can crucially determine corporate
payouts. Exploiting the staggered rejections of the inevitable disclosure doctrine (IDD) across 15
U.S. states as exogenous shocks that potentially increase the mobility of key talents, we find that
treatment firms increase payouts relative to control firms following the rejections of the IDD.
The baseline effects are more pronounced among firms with more reliance on key human capital,
better corporate governance, lower risk, and greater product market competition. These findings
suggest that higher payouts not only enable shareholders of financially healthy focal firms to
deter the capture of economic rents by key talents that threaten to leave, but also serve as a
predation tool to stimulate key talent outflows from financially unhealthy peer competitors.

Authors

• Kose John, New York University

• Xiaoran Ni, Xiamen University

• Chi Zhang, UMass Lowell