Shareholder Litigation and Corporate Culture

46 Pages Posted: 15 Jun 2022 Last revised: 18 Jun 2022

See all articles by Cheng "Jason" Jiang

Cheng "Jason" Jiang

Boston College

Kose John

New York University (NYU) - Department of Finance

Ming Ju

Louisiana Tech University - College of Business

Date Written: 2022


We investigate the effect of shareholder litigation risk on corporate culture. We measure corporate culture by a novel machine learning metric following Li et al. (2021). Exploiting exogenous declines in shareholder litigation rights and derivative lawsuit risk following the staggered adoption of Universal Demand (UD) law by the U.S. states, we document that weaker shareholder litigation rights leads to lower corporate culture score for both full sample and matched sample. Moreover, the relationship is more pronounced for firms with legal experts among directors or top executives, and for firms with riskier litigation outlook. We also show that the adoption of UD law weakens corporate culture through the channel of weakened corporate governance. Our findings suggest that the shareholder litigation risk strengthens corporate governance, which in turn improves corporate culture.

Keywords: Corporate Governance; Corporate Culture; Universal Demand Law; Shareholder Litigation Risk

JEL Classification: G34, G38, M14

Suggested Citation

Jiang, Cheng and John, Kose and Ju, Ming, Shareholder Litigation and Corporate Culture (2022). Available at SSRN: or

Cheng Jiang

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Ming Ju (Contact Author)

Louisiana Tech University - College of Business ( email )

Railload and College Ave.
Ruston, LA 71272
United States

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