From Academia to the Courtroom: Impact of Academic Executives on Corporate Litigation Risk

Abstract

Litigation is one of the most common risks a company may face during its operations. This study investigates whether executives with academic work experience (“academic executives”) reduce corporate litigation in China. We found that academic executives significantly reduce corporate litigation, especially when they reach critical mass on the board. Specifically, academic executives affect corporate litigation by intensifying the quality of internal controls and reducing earnings management. Further analyses showed that the effect of academic executives on corporate litigation is mainly because of executives with teaching experience in universities. Our findings shed light on the value of executives’ academic work experience in risk management and corporate governance in the context of the upper echelons and imprinting theories.

Keywords: Academic Experience, Litigation Risk, Critical mass, Executive Characteristics, earnings management