We examine the effect of litigation risk on management's decision to issue earnings forecasts. We use a new ex ante measure of litigation risk, namely, the Directors and Officers liability insurance premium. This measure bypasses significant problems associated with the estimation of ex ante...

Using D&O insurance premia from the 2001-2004 Tillinghast D&O insurance surveys as a proxy for litigation risk, we show that audit fees are positively associated with litigation risk even after controlling for several quantitative risk factors known to influence both the insurance premium and...