Publication Type

Journal Article

Version

acceptedVersion

Publication Date

6-2018

Abstract

Using the staggered adoption of universal demand (UD) laws in the United States, we study the effect of shareholder litigation risk on corporate disclosure. We find that disclosure significantly increases after UD laws make it more difficult to file derivative lawsuits. Specifically, firms issue more earnings forecasts and voluntary 8-K filings, and increase the length of management discussion and analysis (MD&A) in their 10-K filings. We further assess the direct and indirect channels through which UD laws affect firms' disclosure policies. We find that the effect of UD laws on corporate disclosure is driven by firms facing relatively higher ex ante derivative litigation risk and higher operating uncertainty, as well as firms for which shareholder litigation is a more important mechanism to discipline managers.

Keywords

Corporate disclosure, Corporate governance, Derivative lawsuits, Shareholder litigation, Universal demand laws

Discipline

Accounting | Accounting Law | Corporate Finance | Litigation

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting Research

Volume

56

Issue

3

First Page

797

Last Page

842

ISSN

0021-8456

Identifier

10.1111/1475-679X.12191

Publisher

Wiley: 24 months - No Online Open

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/1475-679X.12191

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