More Disclosure, Fewer Outside Opportunities? Accelerated Patent Disclosure and Market for Managerial Human Capital

This paper studies whether and how firms’ enhanced public disclosures can spill over to the managerial labor market by exploiting an institutional reform requiring the timely publication of patent filings. Consistent with these disclosures crowding out the demand for directors and senior managers’ (DSMs) private information, I find that their external employment opportunities deteriorate when firms disclose patent information more timely. This effect is stronger when the perceived value of disclosed information is higher and when DSMs have less operational experience in the patent-disclosing firm. Furthermore, their declining human capital value is priced in their decreased total compensation and further supported by their diminishing role in transferring information about technological innovations. Collectively, these results shed light on how public disclosures can shape the managerial labor market by substituting private information flows between firms through DSM ties.