Shareholder Litigation Risk and Its Effect on a Firm's Cash, Investment, and Debt

Talijan, Vuk

doi:10.2139/ssrn.2808766

Shareholder Litigation Risk and Its Effect on a Firm's Cash, Investment, and Debt

61 Pages Posted: 13 Jul 2016 Last revised: 21 Nov 2017

See all articles by Vuk Talijan

Vuk Talijan

University of Southern California - Marshall School of Business

Date Written: November 20, 2017

Abstract

Shareholder litigation risk varies across time and across firms. When shareholder litigation risk is high, it can increase (decrease) a firm’s cash and investment before (after) a lawsuit filing. When shareholder litigation risk is low, little to no impact occurs. A quasi-natural experiment using two legal shocks, In re IPO and CAFA, supports a causal interpretation. Shareholder litigation risk can also impact a firm’s debt around the time of a lawsuit filing, but the results are less clear-cut.

Keywords: Empirical Corporate Finance, Shareholder Litigation

JEL Classification: G32, G38, K22, K41

Suggested Citation: Suggested Citation

Talijan, Vuk, Shareholder Litigation Risk and Its Effect on a Firm's Cash, Investment, and Debt (November 20, 2017). Available at SSRN: https://ssrn.com/abstract=2808766 or http://dx.doi.org/10.2139/ssrn.2808766