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Inalienable Human Capital and Debt Choice: Evidence from Quasi-Exogenous Shocks

Author

Listed:
  • Sabri Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School)

  • Xiaoran Ni

    (Xiamen University)

  • David Yin

    (University of Miami)

Abstract

Motivated by Hart and Moore (1994)'s theoretical framework on inalienable human capital and debt contracting, we empirically investigate how firms adjust their debt structure in response to increased human capital mobility risk. Exploiting the staggered rejection of the inevitable disclosure doctrine (IDD), which potentially facilitates key talent outflows, we find that treated firms exhibit a statistically significant increase in private debt reliance relative to public debt. This result persists across various model specifications and is further corroborated by utilizing state-level noncompete enforceability as alternative proxies for changes in human capital mobility. Cross-sectional analysis suggests that the flexibility in renegotiation and enhanced monitoring associated with private debt provide crucial benefits in managing the heightened risk of human capital loss.

Suggested Citation

  • Sabri Boubaker & Xiaoran Ni & David Yin, 2023. "Inalienable Human Capital and Debt Choice: Evidence from Quasi-Exogenous Shocks," Post-Print hal-04946045, HAL.
    • Handle: RePEc:hal:journl:hal-04946045
    DOI: 10.2139/ssrn.3897481
    as

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