Publications
Publications
- Forthcoming
- Management Science
Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits
By: Elisabeth Kempf and Oliver Spalt
Abstract
This paper provides novel evidence suggesting that securities class action lawsuits, a central pillar of the U.S. litigation and corporate governance system, can constitute an obstacle to valuable corporate innovation. We first establish that valuable innovation output makes firms particularly vulnerable to costly low-quality class action litigation. Exploiting judge turnover in federal courts, we then show that changes in class action litigation risk affect the value and number of patents filed, suggesting firms take into account that risk in their innovation decisions. A new perspective we provide is that innovation success, not only innovation failure, can increase firms' securities class action litigation risk.
Keywords
Class-action Litigation; Turnover; Lawsuits and Litigation; Innovation and Invention; Risk and Uncertainty
Citation
Kempf, Elisabeth, and Oliver Spalt. "Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits." Management Science (forthcoming). (Pre-published online April 11, 2022.)