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U.S. class action lawsuits targeting foreign firms: The country spillover effect

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  • Huang, Xuxing
  • Rui, Yixuan
  • Shen, Jianfeng
  • Tian, Gloria Y.

Abstract

We find negative price reactions among non-sued U.S.-listed foreign firms to filings of U.S. shareholder lawsuits targeting firms from their home country. This country spillover effect is stronger for lawsuits, especially accounting-related ones, targeting firms from more poorly-governed countries. We also document a stronger country spillover effect for a recent wave of U.S. lawsuits targeting Chinese issuers than for other standalone litigation. Finally, a foreign firm's price reaction to lawsuits targeting its country peers predicts its chance of being sued in the future. Our findings are consistent with investors updating a foreign firm's litigation risk upon lawsuits targeting its country peers.

Suggested Citation

  • Huang, Xuxing & Rui, Yixuan & Shen, Jianfeng & Tian, Gloria Y., 2017. "U.S. class action lawsuits targeting foreign firms: The country spillover effect," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 378-400.
    • Handle: RePEc:eee:corfin:v:45:y:2017:i:c:p:378-400
    DOI: 10.1016/j.jcorpfin.2017.05.011
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    References listed on IDEAS

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    Cited by:

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    2. Salma Damak & Hend Guermazi & Adel Beldi, 2022. "The Stock Market Reaction to Securities Class Action Filings," International Journal of Economics and Financial Issues, Econjournals, vol. 12(6), pages 127-132, November.

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    More about this item

    Keywords

    Class action lawsuits; U.S.-listed foreign firms; Country spillovers;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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