Protection of trade secrets and capital structure decisions

Sandy J Klasa; Hernán Ortiz-Molina; Matthew Serfling; Shweta Srinivasan

doi:10.1016/j.jfineco.2018.02.008

Protection of trade secrets and capital structure decisions

Sandy J Klasa, Hernán Ortiz-Molina, Matthew Serfling, Shweta Srinivasan

Finance

Research output: Contribution to journal › Article

13 Scopus citations

Abstract

Firms strategically choose more conservative capital structures when they face greater competitive threats stemming from the potential loss of their trade secrets to rivals. Following the recognition of the Inevitable Disclosure Doctrine by US state courts, which exogenously increases the protection of a firm's trade secrets by reducing the mobility of its workers who know its secrets to rivals, the firm increases its leverage relative to unaffected rivals. The effect is stronger for firms with a greater risk of losing key employees to rivals, for those facing financially stronger rivals, and for those in industries where competition is more intense.

Original language	English (US)
Journal	Journal of Financial Economics
DOIs	https://doi.org/10.1016/j.jfineco.2018.02.008
State	Accepted/In press - Jan 1 2018

Keywords

Capital structure
Competitive threats
Intellectual property
Trade secrets

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/j.jfineco.2018.02.008

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Klasa, S. J., Ortiz-Molina, H., Serfling, M., & Srinivasan, S. (Accepted/In press). Protection of trade secrets and capital structure decisions. Journal of Financial Economics. https://doi.org/10.1016/j.jfineco.2018.02.008

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