This study examines the effect of litigation risk and litigation costs on firms' credit ratings and debt financing. The results show that litigation affects a firm's creditworthiness and debt costs in two stages. Before a lawsuit filing, firms at higher risk of litigation have lower credit...

In US derivative cases, plaintiffs' lawyer fees and monetary awards have a distorting effect on shareholder value. We evaluate the benefits of corporate litigation without these externalities using a dataset for the Netherlands between 2002 and 2013. We find significant abnormal returns within a...