Does Shareholder Litigation Risk Cause Public Firms to Delist? Evidence from Securities Class Action Lawsuits

Brogaard, Jonathan; Le, Nhan; Nguyen, Duc Duy; Sila, Vathunyoo

Abstract

Using three exogenous shocks to ex ante litigation risk, including federal judge ideology and two influential judicial precedents, we find that lower shareholder litigation risk reduces a firm’s propensity to delist from the U.S. stock markets. The effect is at least partially driven by indirect costs of litigation and that being a private firm can significantly reduce the threat of litigation. Overall, the results suggest that mitigating excessive litigation costs for public firms is crucial to ensure the continued vibrancy of the U.S. stock market.

Citation

Brogaard, J., Le, N., Nguyen, D. D., & Sila, V. (online). Does Shareholder Litigation Risk Cause Public Firms to Delist? Evidence from Securities Class Action Lawsuits. Journal of Financial and Quantitative Analysis, 1-55. https://doi.org/10.1017/s0022109023000571

• Journal Article Type: Article
• Acceptance Date: Jan 3, 2023
• Online Publication Date: Apr 27, 2023
• Publication Date: 2023
• Deposit Date: Jan 4, 2023
• Publicly Available Date: Jan 4, 2023
• Journal: Journal of Financial and Quantitative Analysis
• Print ISSN: 0022-1090
• Electronic ISSN: 1756-6916
• Publisher: Cambridge University Press
• Peer Reviewed: Peer Reviewed
• Pages: 1-55
• DOI: https://doi.org/10.1017/s0022109023000571
• Public URL: https://durham-repository.worktribe.com/output/1183875