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Green innovation and shareholder litigation rights

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  • Treepongkaruna, Sirimon
  • Padungsaksawasdi, Chaiyuth

Abstract

We rely on the staggered adoption of the Universal Demand Laws, which led to an exogenous decline in derivative litigation risk, as a quasi-natural experiment to explore the relation between shareholder-initiated litigation risk and a firm's green innovation. Consistent with the pressure hypothesis, we show that our difference-in-differences coefficient estimates implying that an exogenous reduction in the threat of derivative litigation economically and significantly reduces a firm's green innovation by 75 %. Making it harder for shareholders to file a lawsuit against top management intensifies agency costs, pressuring managers become more risk-averse and avoid investing in long-term projects such as green innovation.

Suggested Citation

  • Treepongkaruna, Sirimon & Padungsaksawasdi, Chaiyuth, 2024. "Green innovation and shareholder litigation rights," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001600
    DOI: 10.1016/j.frl.2024.105130
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    References listed on IDEAS

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    Cited by:

    1. Dong, Zhenlin & Wang, Junzhi, 2024. "Does public data access stimulate the efficiency of corporate green innovation?," Finance Research Letters, Elsevier, vol. 65(C).

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