Litigating Innovation: Evidence from Securities Class Action Lawsuits

81 Pages Posted: 11 Feb 2020

See all articles by Elisabeth Kempf

Elisabeth Kempf

University of Chicago - Booth School of Business

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

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Date Written: January 2020

Abstract

Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and lead to substantial shareholder-value losses. We establish this fact using data on class action lawsuits between 1996 and 2011 and the value of newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that greater failure propensity of innovative firms drives their litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation

target. Our results support the view that the class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

Keywords: Class Action Lawsuit, corporate governance, Innovation, law and economics, patents, Shareholder Litigation

Suggested Citation

Kempf, Elisabeth and Spalt, Oliver G., Litigating Innovation: Evidence from Securities Class Action Lawsuits (January 2020). CEPR Discussion Paper No. DP14358. Available at SSRN: https://ssrn.com/abstract=3535442

Elisabeth Kempf (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/k/elisabeth-kempf

Oliver G. Spalt

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131
Germany

European Corporate Governance Institute (ECGI) ( email )

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

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