Which Companies Pay More (or Less) in Legal Fees? An Empirical Study of India

47 Pages Posted: 9 Jan 2022

See all articles by Srinivasan Sankaraguruswamy

Srinivasan Sankaraguruswamy

National University of Singapore (NUS) - Department of Accounting

Umakanth Varottil

National University of Singapore (NUS) - Faculty of Law; European Corporate Governance Institute (ECGI)

Abstract

Although the demand for corporate legal services has grown significantly, so has the pressure on companies to reduce legal costs, thereby necessitating a “data-and-metrics” driven approach to legal fees. Accordingly, we exploit the availability of a unique dataset comprising legal fees that Indian corporations have spent over a 30-year period from 1990 to 2020. We undertake the first cross-sectional analysis of legal fees across various exploratory variables over a long period of time. The results show an increasing trend in the quantum of legal fees incurred by Indian companies during the period. They overwhelmingly suggest that large firms (measured along the lines of total assets, industry segmentation, export and import orientation) spend a higher quantum in legal fees than do small firms. Legal costs are higher for companies that undertake capital raising or mergers and acquisitions transactions in a given financial year than those that do not experience such events. Finally, legal fees tend to be higher in certain industry sectors such as technology and energy where significant contracting, regulatory or other form of legal work is pervasive. It is our expectation that the results and accompanying data analysis will aid purchasers of legal services (being corporations and their in-house legal departments) as well as providers (being law firms and legal professionals) in planning and budgeting for legal fees, and also in devising and implementing appropriate fee arrangements.

Keywords: Legal fees, India, significant corporate event, legal risk, law firms

Suggested Citation

Sankaraguruswamy, Srinivasan and Varottil, Umakanth, Which Companies Pay More (or Less) in Legal Fees? An Empirical Study of India. Available at SSRN: https://ssrn.com/abstract=3996180 or http://dx.doi.org/10.2139/ssrn.3996180

Srinivasan Sankaraguruswamy

National University of Singapore (NUS) - Department of Accounting ( email )

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Umakanth Varottil (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

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European Corporate Governance Institute (ECGI) ( email )

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