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Does Shareholder Litigation Affect the Corporate Information Environment?

Le, N.; Nguyen, D.D.; Sila, V.

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Authors

N. Le

V. Sila



Abstract

This paper examines whether shareholder litigation contributes to the decline in the number of U.S. stock market listings. We find that higher litigation risk induces firms to delist. We establish causality using two exogenous shocks to ex-ante litigation risk, including federal judge ideology and an influential judicial precedent. We find that the effect is at least partially driven by indirect costs of litigation and that being private can significantly reduce the threat of litigation. The results suggest that mitigating excessive litigation costs for public firms is crucial to ensure the continued vibrancy of the U.S. stock market.

Citation

Le, N., Nguyen, D., & Sila, V. (2021). Does Shareholder Litigation Affect the Corporate Information Environment?. Journal of Financial Markets, 56, Article 10060. https://doi.org/10.1016/j.finmar.2020.100600

Journal Article Type Article
Acceptance Date Aug 22, 2020
Online Publication Date Nov 6, 2021
Publication Date 2021-11
Deposit Date Sep 9, 2021
Publicly Available Date Mar 29, 2024
Journal Journal of Financial Markets
Print ISSN 1386-4181
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 56
Article Number 10060
DOI https://doi.org/10.1016/j.finmar.2020.100600
Public URL https://durham-repository.worktribe.com/output/1235003

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