Abstract

http://ssrn.com/abstract=1632638
 
 

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Measuring Securities Litigation Risk


Irene Y. Kim


George Washington University

Douglas J. Skinner


The University of Chicago - Booth School of Business

September 1, 2011

Chicago Booth Research Paper No. 10-23
Journal of Accounting & Economics (JAE), Forthcoming

Abstract:     
Extant research commonly uses indicator variables for industry membership to proxy for securities litigation risk. We provide evidence on the construct validity of this measure by reporting on the predictive ability of alternative models of litigation risk. While the industry measure alone does a relatively poor job of predicting litigation, supplementing this variable with measures of firm characteristics (such as size, growth, and stock volatility) considerably improves predictive ability. Additional variables such as those that proxy for corporate governance quality and managerial opportunism do not add much to predictive ability and so do not meet the cost-benefit test for inclusion.

Number of Pages in PDF File: 59

Keywords: Litigation risk, Securities litigation, Corporate disclosure

JEL Classification: K22, K41, M41

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Date posted: July 1, 2010 ; Last revised: December 29, 2012

Suggested Citation

Kim, Irene Y. and Skinner, Douglas J., Measuring Securities Litigation Risk (September 1, 2011). Chicago Booth Research Paper No. 10-23; Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1632638 or http://dx.doi.org/10.2139/ssrn.1632638

Contact Information

Irene Y. Kim
George Washington University ( email )
2121 I Street NW
Washington, DC 20052
United States
Douglas J. Skinner (Contact Author)
The University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7137 (Phone)

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