Managerial Opportunism During Corporate Litigation

Download or read book Managerial Opportunism During Corporate Litigation written by Bruce Haslem and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a large sample of litigation events involving publicly 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. Specifically, firms with weak corporate governance settle litigation more quickly, and the market reacts more negatively to settlements involving firms with higher agency costs.