Journal of Financial and Quantitative Analysis Vol. 59 No. 4 2024

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

Jonathan Brogaard¹; Nhan Le²; Duc Duy Nguyen³; Vathunyoo Sila⁴

¹ University of Utah · ² Australian National University · ³ Durham University · ⁴ University of Edinburgh

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.

DOI

10.1017/s0022109023000571

Volume

59

Issue

4

Pages

1726-1759

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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