Measuring securities litigation risk
AbstractExtant research commonly uses indicator variables for industry membership to proxy for securities litigation risk. We provide evidence on the construct validity of this measure by reporting on the predictive ability of alternative models of litigation risk. While the industry measure alone does a relatively poor job of predicting litigation, supplementing this variable with measures of firm characteristics (such as size, growth, and stock volatility) considerably improves predictive ability. Additional variables such as those that proxy for corporate governance quality and managerial opportunism do not add much to predictive ability and so do not meet the cost–benefit test for inclusion.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Accounting and Economics.
Volume (Year): 53 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jae
Litigation risk; Securities litigation; Corporate disclosure;
Find related papers by JEL classification:
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
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