Does Shareholder Litigation Risk Cause Public Firms to Delist? Evidence from Universal Demand Laws

45 Pages Posted: 29 May 2019 Last revised: 13 Aug 2021

See all articles by Nhan Le

Nhan Le

Australian National University

Duc Duy Nguyen

Durham University

Vathunyoo Sila

University of Edinburgh

Date Written: May 4, 2019

Abstract

The number of listed firms in the U.S. has fallen by half since the late 1990s. Our paper examines whether and to what extent the costs of shareholder litigation have contributed to this trend. Using the staggered adoption of universal demand (UD) laws, we find that the reduction in shareholder litigation risk lowers incidences of firms delisting from stock exchanges. Furthermore, the effect is concentrated among firms facing higher ex ante litigation risk. UD law adoptions also encourage new listings. Overall, our findings suggest that the pressure imposed by shareholder litigation increases the costs of listing.

Keywords: Shareholder litigation, Derivative lawsuit, Stock market listing, Delisting, New Listing

JEL Classification: D04, D22, G30, K22

Suggested Citation

Le, Nhan and Nguyen, Duc Duy and Sila, Vathunyoo, Does Shareholder Litigation Risk Cause Public Firms to Delist? Evidence from Universal Demand Laws (May 4, 2019). Available at SSRN: https://ssrn.com/abstract=3382805 or http://dx.doi.org/10.2139/ssrn.3382805

Nhan Le

Australian National University ( email )

26C Kingsley Street
Acton, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://sites.google.com/a/colorado.edu/nhan-le/

Duc Duy Nguyen (Contact Author)

Durham University ( email )

Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

HOME PAGE: http://sites.google.com/site/louisnguyen6589/home

Vathunyoo Sila

University of Edinburgh ( email )

29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom
+447428747109 (Phone)

HOME PAGE: http://https://www.business-school.ed.ac.uk/staff/ben-sila

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