Theses and Dissertations
Date of Award
8-1-2024
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Accountancy
First Advisor
Haiyan Zhou
Second Advisor
Arno Forst
Third Advisor
Nam Nguyen
Abstract
This dissertation consists of two essays on shareholder derivative lawsuit issues in accounting. In the first essay, I investigate the causal effect of shareholder litigation rights on information quality by using the staggered adoption of universal demand (UD) laws as an exogenous variation in litigation risk. My empirical findings from the difference-in-differences methodology align with the theory that shareholder litigation risk plays a deterrence role and acts as a corporate governance mechanism. I find a significant drop in information quality measures for firms incorporated in states that adopted UD laws, which is consistent with the notion that higher (lower) shareholder litigation risk improves (deteriorates) the corporate information environment. Further analysis shows that corporate social responsibility (CSR), audit quality, and corporate governance weaken the relationship between UD laws and information quality. In contrast, managerial ability and information asymmetry strengthen the relationship. The baseline result holds in a set of sensitivity tests, including tests using class action lawsuits as the alternative shock, excluding firms incorporated in Delaware state, using alternative information quality measures, and tests examining the effect of high information asymmetry. In my second essay, I explore the complex relationship between Universal Demand (UD) laws and audit fees, revealing how legal changes influence audit economics. By examining the impact of reduced shareholder litigation risk through the adoption of UD laws on audit fees, this research offers insights into corporate governance, legal environments, and financial reporting. The empirical findings indicate that the adoption of UD laws is associated with an increase in audit fees, countering the expectation that reduced litigation risk would lower audit costs. Additionally, the study highlights the moderating effects of managerial ability and corporate social responsibility (CSR) on the relationship between UD laws and audit fees, providing a nuanced understanding of how governance mechanisms affect audit costs. The results remain robust after controlling for corporate governance other state-level laws and excluding Ninth Circuit states.Keywords: UD laws, shareholder litigation risk, corporate governance, CSR, managerial ability, class action lawsuits, derivative lawsuits, audit fees, information quality.
Recommended Citation
Zuven, Md Zubair, "The Role of Shareholder Derivative Lawsuits in Accounting: Impacts on Corporate Information Quality and Audit Fee Determination" (2024). Theses and Dissertations. 1535.
https://scholarworks.utrgv.edu/etd/1535
Comments
Copyright 2024 Md Zubair Zuven. https://proquest.com/docview/3100339842