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Stock Ownership of Federal Judges and its Impact on Corporations

Author

Listed:
  • Knill, April M.

    (University of South Carolina - Darla Moore School of Business)

  • Kindelsperger, Joseph Fred

    (Florida State University - Department of Finance)

  • Ovtchinnikov, Alexei V.

    (HEC Paris)

Abstract

We analyze conflicts of interests of federal judges in corporate litigation. Judges who own stock in industry peer firms of corporate litigants are more likely to render judgments benefiting those litigants. Specifically, in cases where litigants are defendants (plaintiffs), judge peer stock ownership is associated with a lower (higher) likelihood of a judgment for the plaintiff, nonmonetary awards, multiple awards, and a smaller (larger) amount awarded to the plaintiff. We show that our results cannot be explained by the judges’ superior industry knowledge stemming from their stock ownership. The results underscore the importance of mandates governing judge stock ownership.

Suggested Citation

  • Knill, April M. & Kindelsperger, Joseph Fred & Ovtchinnikov, Alexei V., 2021. "Stock Ownership of Federal Judges and its Impact on Corporations," HEC Research Papers Series 1443, HEC Paris.
    • Handle: RePEc:ebg:heccah:1443
    DOI: 10.2139/ssrn.3951325
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    Keywords

    judge; stock ownership; peer; impartiality; litigation; justice;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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