Shareholder Litigation Risk and the Information Environment: Revisiting Evidence from Two Natural Experiments

50 Pages Posted: 29 Jan 2018 Last revised: 5 Oct 2022

See all articles by Audra L. Boone

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business; European Corporate Governance Institute (ECGI)

Eliezer M. Fich

Drexel University - Department of Finance

Thomas P. Griffin

Villanova University - Department of Finance & Real Estate

Date Written: October 4, 2022

Abstract

A court case that reduced securities class action litigation risk led to less frequent voluntary disclosure but did not significantly alter information asymmetry among market participants. Conversely, state laws that reduced derivative litigation risk led to more frequent voluntary disclosure but resulted in significantly higher information asymmetry. To reconcile these differences, we highlight that securities class action suits address disclosure, while derivative suits address both disclosure and operating decisions, and examine the effect on firm operations. Our results suggest that the observed effect of derivative litigation risk on the information environment is primarily driven by concomitant changes in firm operations.

Keywords: Information Environment, Disclosure, Shareholder Litigation, Silicon Graphics Inc. Ruling, Universal Demand Laws

JEL Classification: D82, G30, G38, K22

Suggested Citation

Boone, Audra and Fich, Eliezer M. and Griffin, Thomas, Shareholder Litigation Risk and the Information Environment: Revisiting Evidence from Two Natural Experiments (October 4, 2022). Available at SSRN: https://ssrn.com/abstract=3106086 or http://dx.doi.org/10.2139/ssrn.3106086

Audra Boone (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Eliezer M. Fich

Drexel University - Department of Finance ( email )

LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)

HOME PAGE: http://https://sites.google.com/view/eliezerfich

Thomas Griffin

Villanova University - Department of Finance & Real Estate ( email )

United States

HOME PAGE: http://www.thomaspgriffin.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
773
Abstract Views
4,301
rank
47,972
PlumX Metrics