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Discussion Paper Details

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Title: Litigating Innovation: Evidence from Securities Class Action Lawsuits

Author(s): Elisabeth Kempf and Oliver G. Spalt

Publication Date: January 2020

Keyword(s): Class Action Lawsuit, corporate governance, Innovation, law and economics, patents and Shareholder Litigation

Programme Area(s): Financial Economics

Abstract: Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and lead to substantial shareholder-value losses. We establish this fact using data on class action lawsuits between 1996 and 2011 and the value of newly granted patents as a measure of valuable innovation output. Our results challenge the widely-held view that greater failure propensity of innovative firms drives their litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. Our results support the view that the class action litigation system may have adverse effects on the competitiveness of the U.S. economy.

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Bibliographic Reference

Kempf, E and Spalt, O. 2020. 'Litigating Innovation: Evidence from Securities Class Action Lawsuits'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14358