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We use a unique hand-collected dataset on corporate litigation to empirically examine the relationship between litigation risk and investment policy. We document a positive relationship between litigation risk and total… Click to show full abstract
We use a unique hand-collected dataset on corporate litigation to empirically examine the relationship between litigation risk and investment policy. We document a positive relationship between litigation risk and total investments. Decomposing total investments into capital expenditure, and research and development expense, we find a positive relationship between litigation risk and capital expenditure. We also find a positive relationship between litigation risk and research and development expense. The results are robust to different measures of litigation risk.
Journal Title: Journal of Economics and Finance
Year Published: 2017
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