Journal article
The need to validate exogenous shocks: Shareholder derivative litigation, universal demand laws and firm behavior
Journal of accounting & economics, Vol.73(1), p.101427
02/2022
DOI: 10.1016/j.jacceco.2021.101427
Abstract
Several recent studies argue that the adoption of universal demand (UD) laws represent an exogenous decline in litigation risk by increasing the procedural hurdles associated with shareholder derivative litigation. This study examines how UD laws affect the incidence of derivative litigation risk and related decisions. We show that the adoption of UD laws had no meaningful impact on derivative litigation from 1996 to 2015. We also find no evidence that UD laws affect aggressive accounting, voluntary disclosure, executive compensation, or corporate governance decisions. Collectively, our findings cast doubt on the validity of using UD laws as an exogenous shock to litigation risk.
•We show that the adoption of universal demand (UD) laws had no meaningful impact on derivative litigation from 1996–2015.•We find no evidence UD laws affect accounting, voluntary disclosure, executive compensation, or corporate governance choices.•Overall, our findings cast doubt on the validity of using universal demand laws as an exogenous shock to litigation risk.
Details
- Title: Subtitle
- The need to validate exogenous shocks: Shareholder derivative litigation, universal demand laws and firm behavior
- Creators
- Dain C. Donelson - University of IowaLaura Kettell - The University of Texas at AustinJohn McInnis - The University of Texas at AustinSara Toynbee - The University of Texas at Austin
- Resource Type
- Journal article
- Publication Details
- Journal of accounting & economics, Vol.73(1), p.101427
- Publisher
- Elsevier B.V
- DOI
- 10.1016/j.jacceco.2021.101427
- ISSN
- 0165-4101
- eISSN
- 1879-1980
- Language
- English
- Date published
- 02/2022
- Academic Unit
- Accounting; Law Faculty
- Record Identifier
- 9984380485702771
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