Measuring securities litigation risk

Kim, Irene; Skinner, Douglas J.

doi:10.1016/j.jacceco.2011.09.005

Cited by 683 publications

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References 58 publications

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“…In addition, ex ante levels of litigation risk may affect a firm's disclosure choices in this setting. However, simple measures of ex ante litigation risk generally do a poor job of differentiating between actual levels of ex ante litigation risk (Kim and Skinner 2010). Thus, in this study I implicitly assume that ex ante litigation risk is constant across my sample, which may reduce the power of my tests.…”

Section: Test Three Hypotheses Related To My Predictions First I mentioning

confidence: 99%

The Information Content of Risk Factor Disclosures in Quarterly Reports

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2014

SSRN Journal

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Section: Test Three Hypotheses Related To My Predictions First I mentioning

confidence: 99%

The Information Content of Risk Factor Disclosures in Quarterly Reports

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2014

SSRN Journal

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“…To benchmark the litigation rate of foreign firms we create a propensity score based matched sample of U.S. firms that have similar risk of getting sued as the foreign sample based on the litigation risk model in Kim and Skinner (2012). The litigation rate for foreign firms is 2.16%…”

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confidence: 99%

“…Research on predicting litigation risk focuses on U.S. companies (e.g., DuCharme et al, 2004;Field, Lowry, and Shu, 2005;Kim and Skinner, 2012) and does not examine foreign companies listed in U.S.…”

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“…We use the litigation risk model in Kim and Skinner (2012) We examine three trigger events from prior literature that may provide information about the underlying misconduct of the firm; 1) accounting restatements, 2) failure to meet management forecasts, and 3) sharp drops in stock price. Prior research has found that restatements are an important determinant of litigation (Palmrose and Scholz, 2004;Hennes et al, 2008).…”

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Securities Litigation Risk for Foreign Companies Listed in the U.S.

Cheng

Srinivasan²,

2012

SSRN Journal

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We study securities litigation risk faced by foreign firms listed on U.S. exchanges. We find that U.S. listed foreign companies experience securities class action lawsuits at about half the rate as do U.S. firms with similar levels of ex ante litigation risk. The lower rate appears to be driven partly by higher transaction costs in uncovering and pursuing litigation against foreign firms. However, once a lawsuit triggering event like an accounting restatement, missing management guidance, or a sharp stock price decline occurs, there is no difference in the litigation rates between a foreign and comparable U.S. firm. This suggests that effective enforcement of securities laws is constrained by transaction costs, and the availability of high quality information that reveals potential misconduct is an important determinant of a well-functioning litigation market for foreign firms listed in the U.S.1

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“…Panel B of Table 10 shows the difference-in-difference of the variables for the 44 "treated" 25 In untabulated tests, I have included more additional specific controls for each specification, including prior probability of beating guidance, proportion of guiding firms within the industry, frequency of capital raising activities, research and development expenses (Brown and Kimbrough 2011), return synchronicity (Morck et al 2000), return skewness (as an additional variable for predicting litigation risk in Kim and Skinner 2012), etc. Similar results are obtained.…”

Section: Additional Controlsmentioning

confidence: 99%

Informational Uniqueness, Corporate Disclosure, and Information Environment

Chau

2016

SSRN Journal

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This dissertation examines how the lack of comparable public peers ("informational uniqueness") is related to a firm's disclosure policy and information environment.Having less information spillover from other public firms may present an information deficiency if it is not compensated by other components of the information environment. Using textual similarity in business description among firms to measure the extent of peer presence, I find that informational uniqueness is associated with a higher propensity by firms to provide ongoing bundled guidance. This is consistent with firms attempting to mitigate the information deficiency through strengthening their tacit commitment to continued disclosure by providing more information regularly on predictable schedules. Overall, I find a strong negative relationship between informational uniqueness and the quality of corporate information environment only among firms without regular bundled guidance. My results suggest that, while informational uniqueness can generate significant information deficiency, firms with strong tacit commitment to ongoing disclosure are largely able to compensate for the lack of information spillover from peers.On the flip side, firms surrounded by many peers may be subject to the influence of peer dynamics on their disclosure behavior. While the presence of comparable public peers likely expands investors' information endowment on the base firm through information spillover on related exposures, discretionary disclosures by peer firms may also signal information arrival. This can raise investors' inferred probability that non-disclosure is due to strategic information withholding rather than the absence of new information. In relation to this, I show that the bid-ask spread of the base firm slightly increases when its closest peer initiates discretionary disclosures, but subsequently decreases upon disclosure by the base firm. In addition, I find that the number of comparable public peers is strongly positively associated with the frequency of discretionary disclosure. Overall, these results suggest that the presence of peer dynamics can induce firms with more peers to provide discretionary disclosures more frequently. This dissertation examines how the lack of comparable public peers ("informational uniqueness") is related to a firm's disclosure policy and information environment. Having less information spillover from other public firms may present an information deficiency if it is not compensated by other components of the information environment. Using textual similarity in business description among firms to measure the extent of peer presence, I find that informational uniqueness is associated with a higher propensity by firms to provide ongoing bundled guidance. This is consistent with firms attempting to mitigate the information deficiency through strengthening their tacit commitment to continued disclosure by providing more information regularly on predictable schedules.Overall, I find a strong negative relationship betwe...

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Measuring securities litigation risk

Cited by 683 publications

References 58 publications

The Information Content of Risk Factor Disclosures in Quarterly Reports

The Information Content of Risk Factor Disclosures in Quarterly Reports

Securities Litigation Risk for Foreign Companies Listed in the U.S.

Informational Uniqueness, Corporate Disclosure, and Information Environment

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