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Litigating Innovation: Evidence from Securities Class Action Lawsuits

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  • Kempf, Elisabeth
  • Spalt, Oliver G.

Abstract

Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and lead to substantial shareholder-value losses. We establish this fact using data on class action lawsuits between 1996 and 2011 and the value of newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that greater failure propensity of innovative firms drives their litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. Our results support the view that the class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

Suggested Citation

  • Kempf, Elisabeth & Spalt, Oliver G., 2020. "Litigating Innovation: Evidence from Securities Class Action Lawsuits," CEPR Discussion Papers 14358, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14358
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    Keywords

    Class Action Lawsuit; corporate governance; Innovation; law and economics; patents; Shareholder Litigation;
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