Corporate Litigation, Governance, and the Role of Law Firms

68 Pages Posted: 28 Sep 2021 Last revised: 3 Nov 2021

See all articles by Allen Ferrell

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Ekaterina Neretina

University of Southern California - Marshall School of Business

William Powley

affiliation not provided to SSRN

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: October 4, 2021

Abstract

Corporations pay out large settlements to their shareholders and other plaintiffs as compensation for corporate governance failures. Hired to achieve and improve settlements, plaintiff law firms can play a central role in litigation outcomes. We provide first systematic evidence of their performance. In our novel comprehensive dataset, top plaintiff law firms (“stars”) capture 48% larger settlements. Defendant corporations’ litigation insurance coverage is also 39% larger, suggesting assortative matching of stars with lawsuits that have ex-ante large expected payoffs. Stars’ visibility and information advantage vis-à-vis less sophisticated plaintiffs help sustain their market share.

Keywords: Corporate litigation, corporate governance, litigation insurance, securities litigation

JEL Classification: K41, G34, L43

Suggested Citation

Ferrell, Allen and Manconi, Alberto and Neretina, Ekaterina and Powley, William and Renneboog, Luc, Corporate Litigation, Governance, and the Role of Law Firms (October 4, 2021). European Corporate Governance Institute - Law Working Paper No. 607/2021, Available at SSRN: https://ssrn.com/abstract=3931487 or http://dx.doi.org/10.2139/ssrn.3931487

Allen Ferrell

Harvard Law School ( email )

Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Ekaterina Neretina

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

William Powley

affiliation not provided to SSRN

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

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

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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