Do Courts Matter for Firm Value? Evidence from the U.S. Court System
79 Pages Posted: 5 Nov 2015 Last revised: 17 Sep 2020
Date Written: May 11, 2020
We estimate how U.S. state courts impact firm value by exploiting a U.S. Supreme Court ruling that exogenously changed firms' exposure to different courts. We find that increased exposure to more business-friendly courts is associated with positive announcement returns. We find no such association for objective court quality. Consistent with the ruling impacting firm value through the legal environment channel, we find that effects are stronger for firms with high litigation exposure. We find that the ruling led to a shift in both the geographic distribution of lawsuits and operations of firms.
Keywords: Courts, Litigation, Governance
JEL Classification: G32, G34, G38, K40
Suggested Citation: Suggested Citation