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Does protection of trade secrets matter for firms’ access to external capital?

Mohamed Shaker Ahmed, Layal Isskandarani, Taimur Sharif, Mohammad Abedin Orcid Logo

International Review of Economics & Finance, Volume: 101, Start page: 104221

Swansea University Author: Mohammad Abedin Orcid Logo

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DOI (Published version): 10.1016/j.iref.2025.104221

Abstract

We investigate how protection of trade secrets affects firms’ access to external finance. In our paper, we use the US state court recognition of the Inevitable Disclosure Doctrine (hereafter IDD) to gain exogenous variation in employee mobility, which protects trade secrets and prevents knowledge sp...

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Published in: International Review of Economics & Finance
ISSN: 1059-0560 1873-8036
Published: Elsevier Inc. 2025
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URI: https://cronfa.swan.ac.uk/Record/cronfa69608
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last_indexed 2025-06-25T05:01:24Z
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spelling 2025-06-24T15:13:24.0696632 v2 69608 2025-06-02 Does protection of trade secrets matter for firms’ access to external capital? 4ed8c020eae0c9bec4f5d9495d86d415 0000-0002-4688-0619 Mohammad Abedin Mohammad Abedin true false 2025-06-02 CBAE We investigate how protection of trade secrets affects firms’ access to external finance. In our paper, we use the US state court recognition of the Inevitable Disclosure Doctrine (hereafter IDD) to gain exogenous variation in employee mobility, which protects trade secrets and prevents knowledge spillover to competitors. We also employ a sample of all non-financial constituents of the S&P 500 between 2005 and 2020. Overall, we find that firms in states adopting the IDD reduce their use of short-term debt, whereas they increase their use of long-term debt compared to those in states rejecting the IDD. For short-term finance, our extended analyses demonstrate that firm age negatively moderates the relationship between adoption of IDD and access to external finance, while CEO age, CEO gender, and CEO-holding MBA positively moderate this relationship. For long-term finance, our extended analyses demonstrate that firm age, CEO gender, and CEO-holding MBA negatively moderate the relationship between adoption of IDD and access to external finance, whereas CEO age, as a moderator, does not affect this relationship. The findings of this paper have significant implications for corporate boards, given that state courts' adoption of IDD is a viable determinant of the components of external funding. Journal Article International Review of Economics & Finance 101 104221 Elsevier Inc. 1059-0560 1873-8036 Protection of trade secrets; External finance; Inevitable disclosure doctrine (IDD) adoption; Human capital; Debt market; Employee mobility 1 7 2025 2025-07-01 10.1016/j.iref.2025.104221 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Not Required This paper was supported by the Major Program of the National Social Science Foundation of China (Grant No. 23&ZD175), the National Natural Science Foundation of China (Grant Nos. 72173096, 72303139, 71873103). 2025-06-24T15:13:24.0696632 2025-06-02T11:45:11.6734325 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Mohamed Shaker Ahmed 1 Layal Isskandarani 2 Taimur Sharif 3 Mohammad Abedin 0000-0002-4688-0619 4 69608__34565__9d13f2e955984895a6bebdfb26590b3b.pdf 69608.VOR.pdf 2025-06-24T15:02:35.8545229 Output 842700 application/pdf Version of Record true © 2025 The Authors. This is an open access article under the CC BY license. true eng http://creativecommons.org/licenses/by/4.0/
title Does protection of trade secrets matter for firms’ access to external capital?
spellingShingle Does protection of trade secrets matter for firms’ access to external capital?
Mohammad Abedin
title_short Does protection of trade secrets matter for firms’ access to external capital?
title_full Does protection of trade secrets matter for firms’ access to external capital?
title_fullStr Does protection of trade secrets matter for firms’ access to external capital?
title_full_unstemmed Does protection of trade secrets matter for firms’ access to external capital?
title_sort Does protection of trade secrets matter for firms’ access to external capital?
author_id_str_mv 4ed8c020eae0c9bec4f5d9495d86d415
author_id_fullname_str_mv 4ed8c020eae0c9bec4f5d9495d86d415_***_Mohammad Abedin
author Mohammad Abedin
author2 Mohamed Shaker Ahmed
Layal Isskandarani
Taimur Sharif
Mohammad Abedin
format Journal article
container_title International Review of Economics & Finance
container_volume 101
container_start_page 104221
publishDate 2025
institution Swansea University
issn 1059-0560
1873-8036
doi_str_mv 10.1016/j.iref.2025.104221
publisher Elsevier Inc.
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
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description We investigate how protection of trade secrets affects firms’ access to external finance. In our paper, we use the US state court recognition of the Inevitable Disclosure Doctrine (hereafter IDD) to gain exogenous variation in employee mobility, which protects trade secrets and prevents knowledge spillover to competitors. We also employ a sample of all non-financial constituents of the S&P 500 between 2005 and 2020. Overall, we find that firms in states adopting the IDD reduce their use of short-term debt, whereas they increase their use of long-term debt compared to those in states rejecting the IDD. For short-term finance, our extended analyses demonstrate that firm age negatively moderates the relationship between adoption of IDD and access to external finance, while CEO age, CEO gender, and CEO-holding MBA positively moderate this relationship. For long-term finance, our extended analyses demonstrate that firm age, CEO gender, and CEO-holding MBA negatively moderate the relationship between adoption of IDD and access to external finance, whereas CEO age, as a moderator, does not affect this relationship. The findings of this paper have significant implications for corporate boards, given that state courts' adoption of IDD is a viable determinant of the components of external funding.
published_date 2025-07-01T17:57:50Z
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score 11.08899

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