Shareholder Litigation and Ownership Structure: Evidence from a Natural Experiment
Management Science, Forthcoming
59 Pages Posted: 21 Jan 2014 Last revised: 27 Sep 2016
Date Written: March 28, 2016
We use a natural experiment to identify a causal effect of the threat of shareholder litigation on ownership structure, governance, and firm performance. We find that when it becomes harder for small shareholders to litigate, ownership becomes more concentrated and shifts from individuals to institutions. Director and officer governance protections drop among these firms, and operating performance drops among firms whose ownership structure does not change. These results suggest that the ability of shareholders to coordinate and litigate against management is important for governance.
Keywords: Litigation; Shareholder Coordination; Ownership Structure; Governance; Institutional Ownership; Securities Class Action
JEL Classification: G23, G32
Suggested Citation: Suggested Citation