Proximity and Litigation: Evidence from the Geographic Location of Institutional Investors

46 Pages Posted: 21 Jun 2018

See all articles by Mieszko Mazur

Mieszko Mazur

Catholic University of Lille - IESEG School of Management

Galla Salganik-Shoshan

Ben-Gurion University of the Negev

Thomas John Walker

Concordia University, Quebec - Department of Finance

Jun Wang

University of Western Ontario - DAN Department of Management and Organizational Studies

Date Written: June 18, 2018

Abstract

In this paper, we examine how the geographic distance between a firm and its largest institutional investors affects the firm’s litigation risk. We show that geographic proximity between the firm and its largest institutional shareholders reduces the incidence of a lawsuit. Moreover, we find that geographic proximity affects the relationship between institutional investors’ ownership and the litigation risk of their portfolio firms. These findings indicate that geographically proximate investors may have an informational advantage over investors who are located far away, and that this advantage manifests itself in more effective monitoring of firm management, and consequently, in lower litigation risk.

Keywords: Litigation, Institutional Investors, Geography, Monitoring, Corporate Governance

JEL Classification: G23, G34, K41

Suggested Citation

Mazur, Mieszko and Salganik-Shoshan, Galla and Walker, Thomas John and Wang, Jun, Proximity and Litigation: Evidence from the Geographic Location of Institutional Investors (June 18, 2018). Journal of Financial Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3198200

Mieszko Mazur

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
France

Galla Salganik-Shoshan

Ben-Gurion University of the Negev ( email )

Beer Sheva
Israel

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Jun Wang (Contact Author)

University of Western Ontario - DAN Department of Management and Organizational Studies ( email )

Social Science Centre
London, Ontario N6A 5C2
Canada

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