Litigation risk and institutional monitoring

Pukthuanthong, Kuntara; Turtle, Harry J.; Walker, Thomas; Wang, Jun

doi:10.1016/j.jcorpfin.2017.05.008

Cited by 68 publications

(33 citation statements)

References 33 publications

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“…Krishnan et al (2016) document that firm behavior as well as investment opportunities could be influenced by activist hedge funds. Similarly, Pukthuanthong et al (2017) find that activist institutional investors reduce litigation risk in terms of securities class actions. Proposals supported by institutional investors may gain substantially more support (Gillan & Starks, 2000).…”

Section: Resultsmentioning

confidence: 95%

“…similarly, Pukthuanthong et al (2017) find that activist institutional investors reduce litigation risk in terms of securities class actions. Proposals supported by institutional investors may gain substantially more support (Gillian and Starks, 2000).…”

Section: VIII Alternative Explanations and Institutional Channelsmentioning

confidence: 92%

“…In addition, institutional ownership can affect a firm's litigation risk (Cheng et al, 2010; Talley, 2009). Institutional investors can choose different monitoring vehicles during fraud cases (Pukthuanthong et al, 2017), which in turn lowers fraudulent activities (Aggarwal et al, 2015; Wu et al, 2016). Coffey and Fryxell (1991), Li and Zhang (2010), and Oh et al (2011) show that institutional investors affect different aspects of corporate social responsibility.…”

Section: Literature Reviewmentioning

confidence: 99%

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Institutional monitoring and litigation risk: Evidence from employee disputes

Rayfield

Unsal

2021

J of Financial Research

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In this study, we investigate how institutional investors help mitigate businessrelated risks in a corporate environment. Using a large sample of employment disputes, litigations, and court cases, we find that institutional investors play a significant role in reducing employment litigation. We observe that firms with larger shares of institutional ownership have a lower incidence of employment lawsuits and that long-term institutional investors are more effective at decreasing employee mistreatment. Our results suggest that institutional investors can improve the employee work environment and help mitigate future employee litigation. The improvement of employee work conditions has been shown to increase a firm's value through increased employee output, reduced litigation, and direct and indirect costs. Our results shed light on the effectiveness of institutional monitoring on a firm's litigation risk.

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Section: Resultsmentioning

confidence: 95%

Section: VIII Alternative Explanations and Institutional Channelsmentioning

confidence: 92%

Section: Literature Reviewmentioning

confidence: 99%

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Institutional monitoring and litigation risk: Evidence from employee disputes

Rayfield

Unsal

2021

J of Financial Research

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“…At the same time, the shareholder litigation literature shows that institutional investors, via their monitoring activities, can significantly affect a firm's litigation risk (e.g., Talley, 2009;Cheng et al, 2010;Pukthuanthong et al, 2017). Institutional monitoring includes extracting and gathering information from and about a firm's management, as well as persuading, influencing, and exerting pressure on the firm's top decision-makers.…”

Section: Introductionmentioning

confidence: 99%

Proximity and litigation: Evidence from the geographic location of institutional investors

Mazur¹,

Salganik-Shoshan²,

Walker³

et al. 2018

Journal of Financial Markets

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In this paper, we examine how the geographic distance between a firm and its largest institutional investors affects the firm's litigation risk. We show that geographic proximity between the firm and its largest institutional shareholders reduces the incidence of a lawsuit. Moreover, we find that geographic proximity affects the relationship between institutional investors' ownership and the litigation risk of their portfolio firms. These findings indicate that geographically proximate investors may have an informational advantage over investors who are located far away, and that this advantage manifests itself in more effective monitoring of firm management, and consequently, in lower litigation risk.

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“…The collective action theory shows how institutional investors are able to control management with their strength and legitimacy to management [23]. Associated with securing the investment of independent minority individual investors, they are also unable to sue for losses due to misinformation, because there is no governance to protect them, so the cost for individual monitoring costs are relatively high [24]. Moreover, most independent individual investors tend to buy shares for short-term speculation to earn their profit [25].…”

Section: A Resultsmentioning

confidence: 99%

Do Western Hegemony Exist in the Selection of Independent Auditors?

Wijaya¹,

Kurniawan²

2020

Proceedings of the International Conference on Management, Accounting, and Economy (ICMAE 2020)

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Most business people perceive that big four affiliated public accounting firms have better quality than others. We use the mixing method to uncover the phenomena of internationalization among the auditor selections. This study only explores the empirical aspects of western hegemony in auditor selection but also present. Those Charged with Governance's subjective perceptions of the Westernization in auditing practice. This study uses a sample of companies in the non-financial sector listed on the Indonesia Stock Exchange during 2016-2018. Preliminary analysis results show that institutional and individual ownership are more inclined to choose affiliated bigfour auditors than the local ones. Whereas when compared to the non-big four affiliated accounting firms, institutional ownership is consistently more interested in the big four affiliated. In further analysis, local institutional ownership seems to prefer international affiliated accounting firms. Foreign institutional ownership always shows a preference for the big four affiliated accounting firms. Regarding individual ownership, researchers divide ownership into an independent, board of the director and management. The analysis proves that only management ownership has a role in choosing auditors. The ownership management tends to choose international affiliated accounting firms. Based on the subjective perception, one of the audit committees revealed that there were crucial differences in audit quality between the local and the international affiliated public accounting firms. Affiliated auditors are indeed far more thorough than local. Using Gidden's global modernity theory, we conclude that globally affiliated auditors can create new expertise needed by their users that is different from the past.

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Litigation risk and institutional monitoring

Cited by 68 publications

References 33 publications

Institutional monitoring and litigation risk: Evidence from employee disputes

Institutional monitoring and litigation risk: Evidence from employee disputes

Proximity and litigation: Evidence from the geographic location of institutional investors

Do Western Hegemony Exist in the Selection of Independent Auditors?

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