Using securities lawsuits related to M&A as an industry shock, we examine whether litigation risk acts as an external governance mechanism by disciplining managers' investment decisions. In the two years following an M&A lawsuit (a lawsuit where plaintiffs allege that the firm hid poor...

This handbook chapter covers the existing theoretical literature on social preference and social welfare under risk (i.e., when probability values enter the data of the situation) and uncertainty (i.e., when this is not the case and only subjective probability assessments can be formed). Section...