Shareholder Litigation Risk and Stock Returns

Di Luo

doi:10.1111/fire.12395

Shareholder Litigation Risk and Stock Returns

Di Luo (Lead / Corresponding author)

Research output: Contribution to journal › Article › peer-review

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Abstract

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 language	English
Number of pages	24
Journal	Financial Review
Early online date	11 May 2024
DOIs	https://doi.org/10.1111/fire.12395
Publication status	E-pub ahead of print - 11 May 2024

Keywords

UD laws
anomaly
asset pricing
litigation risk

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1111/fire.12395Licence: CC BY

Final published versionFinal published version, 329 KBLicence: CC BY

Cite this

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abstract = "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.",

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Shareholder Litigation Risk and Stock Returns

Abstract

Keywords

ASJC Scopus subject areas

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