The wealth effects of corporate lawsuits

Fields, M. Andrew

doi:10.1016/0148-2963(90)90049-j

Cited by 18 publications

(4 citation statements)

References 10 publications

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“…In particular, stockholders are allowed to sue management when they believe managers are abusing their positions of power (Ferris et al, 2007;Shleifer & Vishny, 1997). In fact, there is a substantial literature related to the incentives and impacts of shareholder litigation (Coffee, 1986;Ferris et al, 2007;Fields, 1990;Francis et al, 1994;Romano, 1991).…”

Section: Shareholder Litigation and Corporate Governancementioning

confidence: 99%

“…Managers are deterred from taking advantage of shareholders when subject to litigation risk, thus mitigating the agency conflict. There is a considerable literature on shareholder litigation risk in law, economics, and finance (Alexander, 1991; Appel, 2015; Coffee, 1986; Chu, 2017; Deng et al, 2014; Fields, 1990; Graham et al, 2008; Johnson et al, 2000; Karpoff et al, 2008; Klein & Leffler, 1981; Romano, 1991). Evidently, this is an important area of the literature.…”

Section: Introductionmentioning

confidence: 99%

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Does shareholder litigation risk promote or hinder corporate social responsibility? A quasi‐natural experiment

Jaroenjitrkam

Treepongkaruna

Jiraporn

2022

Corp Soc Responsibility Env

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Exploiting an exogenous shock that diminishes the shareholder litigation risk for certain firms, we examine the effect of litigation risk on corporate social responsibility.In particular, we take advantage of an unexpected ruling by the Ninth Circuit Court that raised the difficulty of shareholder litigation. Our results show that an exogenous reduction in litigation risk results in significantly stronger CSR. Lower litigation risk improves managers' job security, thereby motivating them to adopt a long-term perspective and invest more in CSR. Further analysis validates the findings, such as propensity score matching and entropy balancing. Because our identification strategy is based on a quasi-natural experiment, our results are more likely to show a causal effect.

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Section: Shareholder Litigation and Corporate Governancementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does shareholder litigation risk promote or hinder corporate social responsibility? A quasi‐natural experiment

Jaroenjitrkam

Treepongkaruna

Jiraporn

2022

Corp Soc Responsibility Env

View full text Add to dashboard Cite

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“…When managers encounter possible legal consequences, they are dissuaded from taking advantage of shareholders, hence minimizing agency conflicts . In the domains of law, economics, finance, and accounting, there is a considerable body of literature on shareholder litigation risk (Alexander, 1991;Appel, 2015;Chu, 2017;Coffee, 1986;Deng, Willis, & Xu, 2014;Fields, 1990;Graham, Li, & Qiu, 2008;Johnson, Kasznik, & Nelson, 2000;Karpoff, Scott Lee, & Martin, 2008;Klein & Leffler, 1981). This is unequivocally a critical area of the literature.…”

Section: Introductionmentioning

confidence: 99%

Shareholder Litigation Rights and ESG Controversies: A Quasi-natural Experiment

Treepongkaruna

Kyaw²,

Jiraporn

2022

SSRN Journal

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“…points out some other threats, for example that employees and customers may regard the slow pace of integration as a sign of uncertainty and may pursue opportunities at rival …rms.11 In reality this is probably a lot more subtle, as evidence shows that settlements -or the anticipation of settlements -in lawsuits increase shareholder wealth. See for exampleFields (1990),Koku and Qureshi (2006),Bhagat et al (1994), or for a comprehensive meta-study,Bhagat and Romano (2002).12 For example, as CT claim, more e¢ cient mergers value their assets higher and are therefore less willing to divest them.…”

mentioning

confidence: 99%

The Determinants of Merger Litigation Strategies: An Empirical Analysis of EC Mergers

Ormosi

2010

SSRN Journal

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Mergers with anticompetitive effects can gain regulatory approval if they prove that the benefits of the merger outweigh the negative effects (efficiency defence), and/or if they offer to modify the merger transaction in a way that eliminates these adverse effects (merger remedy). Although these two merger control instruments have been analysed separately, little work has been dedicated to modelling merger litigation where both the provision of efficiency-related evidence and remedy-offers are at the merging firms discretion, which is the case for example in the EC. This paper is an attempt to fill the empirical part of this gap. Its novelty lies not only in empirically modelling the system of decisions that firms face in merger litigation but in using data from company reports on the merger-generated synergy expectations signalled to shareholders, which allows the direct empirical testing of some of the assumptions and findings from previous works. Evidence is presented that firms' own efficiency expectations do not have an impact on the probability of applying for efficiency defence; that pre-merger synergy expectations enhance the willingness to offer remedies; false efficiency claims can be distinguished by looking at the timing of the remedyoffer; and finally, the cost of delay plays a central role in designing firms' litigation strategy, especially when these costs exceed the cost of the remedy.

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The wealth effects of corporate lawsuits

Cited by 18 publications

References 10 publications

Does shareholder litigation risk promote or hinder corporate social responsibility? A quasi‐natural experiment

Does shareholder litigation risk promote or hinder corporate social responsibility? A quasi‐natural experiment

Shareholder Litigation Rights and ESG Controversies: A Quasi-natural Experiment

The Determinants of Merger Litigation Strategies: An Empirical Analysis of EC Mergers

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