Economics and Finance Faculty Publications and Presentations
Document Type
Article
Publication Date
6-2020
Abstract
We exploit the staggered adoption of the universal demand (UD) laws across U.S. states, which impedes shareholder rights to initiate derivative lawsuits, as a quasi-natural experiment to examine the relation between shareholder litigation rights and firm capital structures. We find that weaker shareholder litigation rights due to the UD laws adoption lead to higher financial leverage, which enhances firm value. Furthermore, the positive relation between the UD laws adoption and financial leverage is more pronounced for firms exposed to higher shareholder litigation risk ex ante or financially constrained firms. Our evidence is consistent with lower shareholder litigation threats motivating firms to increase financial leverage.
Recommended Citation
Nguyen, Nam H., Hieu V. Phan, and Eunju Lee. “Shareholder Litigation Rights and Capital Structure Decisions.” Journal of Corporate Finance 62 (June 1, 2020): 101601. https://doi.org/10.1016/j.jcorpfin.2020.101601.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Publication Title
Journal of Corporate Finance
DOI
10.1016/j.jcorpfin.2020.101601
Comments
© 2020 Elsevier B.V. Original published version available at https://doi.org/10.1016/j.jcorpfin.2020.101601