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Litigation risk and investment policy

Author

Listed:
  • James Malm

    (College of Charleston)

  • Hari P. Adhikari

    (Embry-Riddle Aeronautical University)

  • Marcin Krolikowski

    (Providence College)

  • Nilesh Sah

    (University of Wisconsin - Green Bay)

Abstract

We use a unique hand-collected dataset on corporate litigation to empirically examine the relationship between litigation risk and investment policy. We document a positive relationship between litigation risk and total investments. Decomposing total investments into capital expenditure, and research and development expense, we find a positive relationship between litigation risk and capital expenditure. We also find a positive relationship between litigation risk and research and development expense. The results are robust to different measures of litigation risk.

Suggested Citation

  • James Malm & Hari P. Adhikari & Marcin Krolikowski & Nilesh Sah, 2017. "Litigation risk and investment policy," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 829-840, October.
    • Handle: RePEc:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9382-6
    DOI: 10.1007/s12197-016-9382-6
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    References listed on IDEAS

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    Cited by:

    1. 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).
    2. Wang, Qiming & Cheng, C.S Agnes & Lian, Qin & Liu, Cathy Zishang, 2022. "Law firm market share and securities class action litigation outcomes," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 596-609.
    3. Malm, James & Soyeh, Kenneth W. & Kanuri, Srinidhi, 2023. "Litigation risk and corporate performance," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

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    More about this item

    Keywords

    Litigation risk; Capital expenditure; Research and development expense; Total investments;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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