Managerial opportunism during corporate litigation

Deskripsi

Using a large sample of litigation events involving publicy listed defendants, we document a surprising fact. The resolution of litigation through a court's decision dominates settlement of litigation from the shareholders' point of view, even when the firm loses. We develop a model using agency costs within the firm to explain why the market views settlement as a negative outcome on average and find empirical evidence supporting the implications of the model. .Printed Journal