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What shapes CSR performance? Evidence from the changing enforceability of non‐compete agreements in the United States

Author

Listed:
  • Karel Hrazdil
  • Jeong‐Bon Kim
  • Xin Li

Abstract

Using a unique setting of exogenous variations in non‐compete agreement (NCA) enforceability in the United States, we investigate whether companies strategically engage in corporate social responsibility (CSR) practices to retain employees. Using a difference‐in‐differences design, we find that an increase in the enforceability of NCAs deteriorates CSR performance. Cross‐sectional tests indicate that peer pressure affects CSR performance interactively with enforceability of NCAs. These findings demonstrate the unintended consequences of regulation and are consistent with the notion that firms strategically engage in CSR practices to retain employees, thereby reducing knowledge spillover associated with employee mobility.

Suggested Citation

  • Karel Hrazdil & Jeong‐Bon Kim & Xin Li, 2021. "What shapes CSR performance? Evidence from the changing enforceability of non‐compete agreements in the United States," Review of Financial Economics, John Wiley & Sons, vol. 39(3), pages 334-359, July.
    • Handle: RePEc:wly:revfec:v:39:y:2021:i:3:p:334-359
    DOI: 10.1002/rfe.1132
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    References listed on IDEAS

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    1. David C. Mauer, 2021. "Introduction to the special issue on labor and corporate finance," Review of Financial Economics, John Wiley & Sons, vol. 39(3), pages 229-231, July.

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