Shareholder Litigation Risk and Stock Returns

Di Luo (Lead / Corresponding author)

Research output: Contribution to journalArticlepeer-review

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Examining the staggered adoption of universal demand (UD) laws as an exogenous shock to shareholder litigation risk, we show that firms have lower stock returns following that adoption in a difference-in-differences (DID) design and Fama and MacBeth (1973) regression. Sorting stocks into UD laws portfolios, we show that firms adopting UD laws earn lower risk-adjusted returns than those who do not. Further, the relation between UD laws and returns is more pronounced when firms face financial constraints, CEOs engage in high risk taking, or takeover protection is low.
Original languageEnglish
Number of pages24
JournalFinancial Review
Early online date11 May 2024
Publication statusE-pub ahead of print - 11 May 2024


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