Protection of trade secrets and capital structure decisions

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

Research output: Contribution to journalArticlepeer-review

132 Scopus citations


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 languageEnglish (US)
Pages (from-to)266-286
Number of pages21
JournalJournal of Financial Economics
Issue number2
StatePublished - May 2018


  • Capital structure
  • Competitive threats
  • Intellectual property
  • Trade secrets

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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