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

45 Pages Posted: 29 Jan 2018 Last revised: 29 Jun 2021

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: June 28, 2021

Abstract

A court case that reduced the threat of securities class action litigation led to less frequent voluntary disclosure, but did not significantly affect the level of information asymmetry. Conversely, state laws that reduced the threat of derivative litigation led to more frequent voluntary disclosure, but increased the level of information asymmetry. We reconcile these differences by highlighting that securities class action lawsuits address disclosure decisions while derivative lawsuits address both disclosure and operating decisions, and show that changes in firms’ real operations is the economic mechanism driving the association between derivative litigation risk and corporate information environments.

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 (June 28, 2021). 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)

Thomas Griffin

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

United States

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

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