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

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

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Authors

Jonathan Brogaard

Nhan Le

Vathunyoo Sila



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. (2023). 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

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Licence
http://creativecommons.org/licenses/by/4.0/

Publisher Licence URL
http://creativecommons.org/licenses/by/4.0/

Copyright Statement
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington. This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.







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