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DOI:
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https://doi.org/10.2139/ssrn.3143690
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URL:
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https://ssrn.com/abstract=3143690
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Additional URL:
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https://ecgi.global/sites/default/files/working_pa...
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Document Type:
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Working paper
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Year of publication:
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2019
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The title of a journal, publication series:
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ECGI Working Paper Series in Finance
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Volume:
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614/2019
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Place of publication:
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Brussels
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Publishing house:
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European Corporate Governance Institute (ECGI)
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Publication language:
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English
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Institution:
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Business School > ABWL, Finanzwirtschaft u. Finanzmarktinstitutionen (Spalt 2019-)
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Subject:
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330 Economics
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Abstract:
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Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and impose a substantial implicit "tax" on these firms. We establish this fact using data on class action lawsuits against U.S. corporations between 1996 and 2011 and the private economic value of a firm's newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that it is the greater failure propensity of innovative firms that drives litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. More broadly, our results provide new evidence to support the view that the current class action litigation system may have adverse effects on the competitiveness of the U.S. economy.
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