Judge Financial Holdings and Case Outcomes: Evidence from Judge Financial Disclosures

Abstract

This paper examines the association between a judge's financial holdings and the outcome of legal cases. Using novel data on financial disclosures of judges and the civil case information of public firms across district courts in the United States between 2000 and 2021, we document multiple instances in which judges fail to recuse themselves in cases where they hold common stock. We find robust evidence that judges appear to rule more favorably and take longer when deciding over conflicted cases than when deciding over unconflicted ones. We also find that investors are positively surprised by these outcomes, as reflected by stock returns to case outcomes. Collectively, our results provide the first large-scale evidence of the relation between judges' financial holdings and case outcomes.

Keywords: JEL Classification: D63, D73, G11, G18, G38, K41 Judge, Stock Ownership, Litigation, Justice, Capital Markets, Disclosure

JEL Classification: D63, D73, G11, G18, G38, K41