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Litigation risk and cash holdings

Author

Listed:
  • James Malm

    (College of Charleston)

  • Srinidhi Kanuri

    (University of Southern Mississippi)

Abstract

We use a unique hand-collected dataset on corporate lawsuits to examine the relationship between litigation risk and cash holdings. We find that an increase in litigation risk is associated with a significant increase in cash holdings. In addition, we document a positive relationship between the level of cash holdings and lawsuits related to the violations of labor, intellectual property, contracts, securities, environmental, product liability, medical liability, and other laws.

Suggested Citation

  • James Malm & Srinidhi Kanuri, 2017. "Litigation risk and cash holdings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 679-700, October.
    • Handle: RePEc:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9373-7
    DOI: 10.1007/s12197-016-9373-7
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    References listed on IDEAS

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    Cited by:

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    2. Li, Weiping & Chen, Xiaoqi & Huang, Jiashun & Gong, Xu & Wu, Wei, 2022. "Do environmental regulations affect firm's cash holdings? Evidence from a quasi-natural experiment," Energy Economics, Elsevier, vol. 112(C).
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    4. Malm, James & Adhikari, Hari P. & Krolikowski, Marcin W. & Sah, Nilesh B., 2021. "The old guard: CEO age and corporate litigation," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    5. Michael Hadani, 2021. "The Reputational Costs of Corporate Litigation: Long-Term Media Reputation Damages to Firms’ Involvement in Litigation," Corporate Reputation Review, Palgrave Macmillan, vol. 24(4), pages 234-246, November.
    6. Han, Feng & Qin, Qi & Peabody, S. Drew, 2022. "Does incentive conflict between CEOs and CFOs benefit firms? Implications for corporate decision-making," Research in International Business and Finance, Elsevier, vol. 63(C).
    7. Xu, Xiaodong & Mu, Yayu & Wang, Juan, 2023. "Corporate risk and financial asset holdings," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    8. Unsal, Omer & Brodmann, Jennifer, 2019. "Workplace environment and payout policy," Journal of Economics and Business, Elsevier, vol. 106(C).
    9. Tobias Basse & Christoph Schwarzbach & J.-Matthias Schulenburg, 2023. "Dividend policy issues in the European pharmaceutical industry: new empirical evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 803-816, July.

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    More about this item

    Keywords

    Litigation risk; Cash holdings;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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