DP14358 Litigating Innovation: Evidence from Securities Class Action Lawsuits
|Author(s):||Elisabeth Kempf, Oliver G. Spalt|
|Publication Date:||January 2020|
|Keyword(s):||Class Action Lawsuit, corporate governance, Innovation, law and economics, patents, Shareholder Litigation|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14358|
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.