Corporate Litigation in Specialized Business Courts

Abstract

In US derivative cases, plaintiffs’ lawyer fees and monetary awards have a distorting effect on shareholder value. We evaluate the benefits of corporate litigation without these externalities using a dataset for the Netherlands between 2002 and 2013. We find significant abnormal returns within a short timespan surrounding the filing and resolution of M&A-related lawsuits. Over longer horizons, we document that resolutions have little impact on shareholder value. Moreover, our findings suggest that longer waiting times for court resolutions are costly. The evidence from the Netherlands supports the view that, in settings without strong distortions, derivative style litigation may enhance firm value.

Keywords: Corporate litigation, Dutch Enterprise Chamber inquiry proceedings, shareholder value, M&A lawsuits

JEL Classification: G34