Litigation Risk and Voluntary Disclosure: Evidence from Legal Changes

Joel F. HOUSTON, Chen LIN, Sibo LIU, Lai WEI

Research output: Journal PublicationsJournal Article (refereed)

3 Citations (Scopus)

Abstract

This paper documents that changes in litigation risk affect corporate voluntary disclosure practices. We make causal inferences by exploiting three legal events that generate exogenous variations in firms' litigation risk. Using a matching-based, fixed-effect difference-in-differences design, we find that the treated firms tend to make fewer (more) management earnings forecasts relative to the control firms when they expect litigation risk to be lower (higher) following the legal event. The results are concentrated on the earnings forecasts conveying negative news and are robust to alternative specifications, samples and outcome variables.
Original languageEnglish
Pages (from-to)247-272
Number of pages26
JournalThe Accounting Review
Volume94
Issue number5
Early online date18 Jan 2019
DOIs
Publication statusPublished - Sep 2019

Bibliographical note

Lin gratefully acknowledges the financial support from The University of Hong Kong and the National Natural Science Foundation of China (No. 71790601).

Keywords

  • earnings forecasts
  • litigation risk
  • shareholder protection
  • Litigation risk
  • Shareholder protection
  • Earnings forecasts

Fingerprint Dive into the research topics of 'Litigation Risk and Voluntary Disclosure: Evidence from Legal Changes'. Together they form a unique fingerprint.

Cite this