This study examines the effect of litigation risk on the readability of corporate financial reports using the 1999 Silicon Graphics Inc. court ruling as a natural experiment. This ruling unexpectedly reduced the litigation risk of firms located in the states of the Ninth Circuit Court (treated...

This paper examines the effects of executive compensation and potential for earnings management on the incidence of shareholder class action lawsuits and their outcomes. Although damage measurement factors,managerial option intensity, and earnings management all significantly affect the...

Class action lawsuits can be detrimental to debtholders because they deteriorate defendant firms' financial position and lower these firms' value. This study examines whether banks price their borrowers' litigation risk in debt contracting. We find that banks charge 19% higher interest spreads...

The primary conclusion from prior literature is that firm size, as a measure of firm resources and capacity to pay, is a key predictor of class action securities settlement amount, and the merits of the case are less important in settlement negotiations. The purpose of this study is to shed...

Drawing on the political theory of judicial decision making, our paper proposes a new and parsimonious ex ante litigation risk measure: federal judge ideology. We find that judge ideology complements existing measures of litigation risk based on industry membership and firm characteristics....