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
Date Written: November 20, 2017
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