Lorna Zhong | Yuanqing Zhong

Working Papers

• Non-Compete Agreements and the Market for Corporate Control , with Andrey Golubov

Abstract: Non-compete agreements (NCAs) limit outside employment options and, therefore, increase personal costs of job displacement for managers. Using state-level changes in NCA enforceability as a natural experiment, we find that managers are more averse to horizontal takeovers when NCA enforcement tightens. In particular, higher enforceability is associated with fewer same-industry takeovers. Those that do materialize are more likely to be hostile, involve higher premiums, and are less likely to complete. Overall, the findings indicate that the use of NCAs and their enforceability have important implications for the market for corporate control.

Presentations: Annual Conference of Financial Economics and Accounting (scheduled), European Finance Association (2026), Johnston Centre Research Roundtable (2026), National University of Singapore (2026), Singapore Management University (2026), Nanyang Technological University (2026), National University of Singapore (2026), American Finance Association  (2025), Financial Intermediation Research Society (2025), Santiago Finance Workshop (2025), American Law and Economics Association (2024), University of Toronto (2023)

Featured in: ECGI, Johnston Centre

Work in Progress

• Litigation Risk in the Market for Corporate Control, with Adel Khusnulgatin

Abstract: This paper studies how litigation risk borne by prospective targets affects acquisition decisions. While acquisition transfers a legally exposed target to an acquirer with greater litigation capacity, it also eliminates the target's standalone limited liability protection. Thus, sufficiently severe litigation risk can reduce merger synergy. Empirically, we exploit the 2017 Supreme Court decision in TC Heartland, which restricted patent-litigation venue and increased the importance of firms' geographic connections to plaintiff-friendly Texas. Following the decision, non-Texas firms disproportionately reduce acquisitions of Texas targets in industries with greater pre-decision exposure to Texas patent litigation. A one-standard-deviation increase in exposure is associated with a 5-7% decline in acquisitions.  Our findings show that contingent legal liabilities can shape firm boundaries by discouraging the consolidation of otherwise valuable assets.