Publications
Publications
- 2016
- HBS Working Paper Series
The Effect of Shareholder Litigation Risk on the Information Environment: The Case of Cross-Listed Firms
By: Anywhere Sikochi
Abstract
I document the causal link between shareholder litigation risk and cross-listed firms’ information environment by exploiting a quasi-natural experiment in the form of a reduction in litigation risk resulting from the 2010 Supreme Court ruling in Morrison v. National Australia Bank. I first show that the ruling reduced litigation risk faced by cross-listed firms as evidenced by lower directors’ and officers’ insurance premiums for Canadian firms after the ruling. I then show that the information environment deteriorated for cross-listed firms after the ruling. The results are more pronounced for firms with low U.S. share activity, in bad-news firm quarters, and for firms from countries with weak legal institutions. By implication, these findings suggest that improvements in foreign firms’ information environment upon listing in the U.S., as documented in prior literature, stem in part from the greater litigation risk associated with the U.S. listing.
Keywords
Cross-listing; Information Environment; Shareholder Litigation Risk; D＆O Insurance; Risk and Uncertainty; Lawsuits and Litigation; Business and Shareholder Relations
Citation
Sikochi, Anywhere. "The Effect of Shareholder Litigation Risk on the Information Environment: The Case of Cross-Listed Firms." Harvard Business School Working Paper, No. 17-048, December 2016.