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

55 Pages Posted: 20 Aug 2015 Last revised: 10 Jul 2019

See all articles by Jared I. Wilson

Jared I. Wilson

Indiana University - Kelley School of Business

Date Written: July 2019

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 and reputation costs 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 (July 2019). 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)

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