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  • April 2022
  • Article
  • Management Science

Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits

By: Elisabeth Kempf and Oliver Spalt
  • Format:Print
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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.

Citation

Kempf, Elisabeth, and Oliver Spalt. "Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits." Management Science (April 2022).

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About The Author

Elisabeth Kempf

Finance
→More Publications

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More from the Authors
  • Political Ideology and International Capital Allocation By: Elisabeth Kempf, Mancy Luo, Larissa Schäfer and Margarita Tsoutsoura
  • The Political Polarization of Corporate America By: Vyacheslav Fos, Elisabeth Kempf and Margarita Tsoutsoura
  • Partisan Professionals: Evidence from Credit Rating Analysts By: Elisabeth Kempf and Margarita Tsoutsoura
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