Article
The Effects of Securities Class Action Litigation on Corporate Liquidity and Investment Policy
Journal of Financial and Quantitative Analysis
Document Type
Article
Language
eng
Format of Original
25 p.
Publication Date
4-1-2015
Publisher
Cambridge University Press
Disciplines
Abstract
The risk of securities class action litigation alters corporate savings and investment policy. Firms with greater exposure to securities litigation hold significantly more cash in anticipation of future settlements and other related costs. The result is due to firms accumulating cash in anticipation of lawsuits and not a consequence of plaintiffs targeting firms with high cash levels. The market value of cash is significantly lower for firms exposed to litigation risk. Corporate investment decisions are also affected by litigation risk, as firms reduce capital expenditures in response. Our results are robust to endogeneity concerns and possible spurious temporal effects.
Citation Information
Matteo P. Arena and Brandon Julio. "The Effects of Securities Class Action Litigation on Corporate Liquidity and Investment Policy" Journal of Financial and Quantitative Analysis (2015) ISSN: 0022-1090 Available at: http://works.bepress.com/matteo_arena/23/
Accepted version. Journal of Financial and Quantitative Analysis, Vol. 50, No. 1-2 (April 2014): 251-275. DOI. © 2014 Cambridge University Press. Used with permission.