The Consequences of Limiting Shareholder Litigation: Evidence from Exclusive Forum Provisions

49 Pages Posted: 20 Aug 2015 Last revised: 17 Oct 2020

See all articles by Jared I. Wilson

Jared I. Wilson

Indiana University - Kelley School of Business

Date Written: August 2020

Abstract

In response to an explosion of shareholder litigation, many firms have adopted exclusive forum provisions which limit lawsuits to courts in a firm’s state of incorporation. This paper examines the consequences of a required venue for shareholder litigation. Provision adopters and firms likely to face litigation experience significant increases in firm value around three exogenous events that confirmed the use of a specified forum. Reduced legal costs and the designation of the domicile court as the sole forum to hear shareholder claims contribute to the increase in firm value. Overall, these findings suggest that a required venue for shareholder litigation benefits firms by eliminating multi-jurisdictional lawsuits and reducing the threat of meritless claims.

Keywords: Shareholder litigation, corporate governance, exclusive forum provision

JEL Classification: G30, G34, K22, K41

Suggested Citation

Wilson, Jared I., The Consequences of Limiting Shareholder Litigation: Evidence from Exclusive Forum Provisions (August 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2646312 or http://dx.doi.org/10.2139/ssrn.2646312

Jared I. Wilson (Contact Author)

Indiana University - Kelley School of Business ( email )

Kelley School of Business
801 W. Michigan Street
Indianapolis, IN 46202
United States
317-278-4715 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
232
Abstract Views
1,818
rank
147,172
PlumX Metrics