The Spillover of Shareholder Litigation Risk and Corporate Voluntary Disclosure

2020 ◽  
Author(s):  
Mengchao Ai ◽  
John (Jianqiu) Bai ◽  
Ting Chen ◽  
Amy X. Sun ◽  
Chi Wan
Keyword(s):  
Voluntary Disclosure ◽  
Litigation Risk ◽  
Shareholder Litigation

The Spillover of Shareholder Litigation Risk and Corporate Voluntary Disclosure

2019 ◽  
Author(s):  
Mengchao Ai ◽  
John (Jianqiu) Bai ◽  
Ting Chen ◽  
Amy X. Sun ◽  
Chi Wan
Keyword(s):  
Voluntary Disclosure ◽  
Litigation Risk ◽  
Shareholder Litigation

Do Managers Disclose or Withhold Bad News? Evidence from Short Interest

2018 ◽  
Vol 94 (3) ◽  
pp. 1-26 ◽  
Author(s):  
Dichu Bao ◽  
Yongtae Kim ◽  
G. Mujtaba Mian ◽  
Lixin (Nancy) Su
Keyword(s):  
Private Information ◽  
Voluntary Disclosure ◽  
Stock Price ◽  
Data Availability ◽  
Bad News ◽  
General Tendency ◽  
Litigation Risk ◽  
Novel Approach ◽  
Conflicting Evidence ◽  
Short Interest

ABSTRACT Prior studies provide conflicting evidence as to whether managers have a general tendency to disclose or withhold bad news. A key challenge for this literature is that researchers cannot observe the negative private information that managers possess. We tackle this challenge by constructing a proxy for managers' private bad news (residual short interest) and then perform a series of tests to validate this proxy. Using management earnings guidance and 8-K filings as measures of voluntary disclosure, we find a negative relation between bad-news disclosure and residual short interest, suggesting that managers withhold bad news in general. This tendency is tempered when firms are exposed to higher litigation risk, and it is strengthened when managers have greater incentives to support the stock price. Based on a novel approach to identifying the presence of bad news, our study adds to the debate on whether managers tend to withhold or release bad news. Data Availability: Data used in this study are available from public sources identified in the study.

Litigation Risk and Voluntary Disclosure: Evidence from Legal Changes

2019 ◽  
Vol 94 (5) ◽  
pp. 247-272 ◽  
Author(s):  
Joel F. Houston ◽  
Chen Lin ◽  
Sibo Liu ◽  
Lai Wei
Keyword(s):  
Voluntary Disclosure ◽  
Earnings Forecasts ◽  
Fixed Effect ◽  
Litigation Risk ◽  
Management Earnings Forecasts ◽  
Causal Inferences ◽  
Difference In Differences ◽  
Negative News ◽  
Effect Difference ◽  
Jel Classifications

ABSTRACT This paper documents that changes in litigation risk affect corporate voluntary disclosure practices. We make causal inferences by exploiting three legal events that generate exogenous variations in firms' litigation risk. Using a matching-based fixed-effect difference-in-differences design, we find that the treated firms tend to make fewer (more) management earnings forecasts relative to the control firms when they expect litigation risk to be lower (higher) following the legal event. The results are concentrated on the earnings forecasts conveying negative news and are robust to alternative specifications, samples, and outcome variables. JEL Classifications: D80; G14; K22; K41; M41.

Shareholder Litigation and Conservative Accounting: Evidence from Universal Demand Laws

2020 ◽  
Author(s):  
Hariom Manchiraju ◽  
Vivek Pandey ◽  
K. R. Subramanyam
Keyword(s):  
Corporate Governance ◽  
Insider Trading ◽  
Accounting Conservatism ◽  
Litigation Risk ◽  
Short Term ◽  
Conservative Accounting ◽  
Shareholder Litigation ◽  
Ex Ante ◽  
Governance Quality ◽  
Corporate Governance Quality

We use the staggered adoption of the Universal Demand Laws (UD Laws) to examine the effect of an exogenous reduction in shareholders' ability to litigate on the extent of accounting conservatism. On average, we find an increase in reporting conservatism post UD. The increased conservatism is concentrated in firms contemplating equity issuance, with high proportion of monitoring investors, and high corporate governance quality. In contrast, firms with specific short-term incentives for aggressive accounting, such as those narrowly beating benchmarks, those with abnormal insider trading and those likely to violate debt covenants, weakly governed firms, and firms with high ex ante litigation risk decrease reporting conservatism after UD. Our results suggest that the relation between the litigation environment and reporting conservatism is complex and dependent on specific characteristics and unique circumstances of the firms.

Sign in / Sign up

Export Citation Format

Share Document