Does disclosure deter or trigger litigation?

doi:10.1016/j.jacceco.2005.04.004

Does disclosure deter or trigger litigation?

2005-09-01

393

PRE

AI

DOI：10.1016/j.jacceco.2005.04.004

Original

Original request for help

Save

Abstract

En 中文

Securities litigation poses large costs to firms. The risk of litigation is heightened when firms have unexpectedly large earnings disappointments. Previous literature presents mixed evidence on whether voluntary disclosure of the bad news prior to scheduled earnings announcements deters or triggers litigation. We show that the counterintuitive finding in prior literature that disclosure triggers litigation could be driven by the endogeneity between disclosure and litigation. Using a simultaneous equations methodology, we find no evidence that disclosure triggers litigation. In fact, consistent with economic arguments, our evidence suggests that disclosure potentially deters certain types of litigation. (c) 2005 Elsevier B.V. All rights reserved.

Keywords:

stockholder litigation

earnings disclosures

endogeneity

Does disclosure deter or trigger litigation?

Abstract

Journal

Organization