Private Litigation Costs and Voluntary Disclosure: Evidence from the Morrison Ruling

58 Pages Posted: 4 May 2014 Last revised: 6 Feb 2017

See all articles by James P. Naughton

James P. Naughton

University of Virginia, Darden School of Business

Tjomme O. Rusticus

University of Minnesota

Clare Wang

University of Colorado at Boulder - Leeds School of Business

Ira Yeung

University of British Columbia (UBC) - Sauder School of Business

Date Written: February 2017

Abstract

We examine the causal effect of expected private litigation costs on voluntary disclosure using a natural experiment, the Supreme Court ruling in Morrison v. National Australia Bank. This ruling reduced expected private litigation costs for foreign cross-listed firms by eliminating the right of shareholders who purchased shares on non-US exchanges to seek compensation in US courts. We find consistent evidence that higher expected private litigation costs lead to greater voluntary disclosure using analyses that exploit the varying impact of Morrison based on both firm- and country-level attributes. Unlike a number of prior studies, we find that this positive relation does not depend on the direction of the news.

Keywords: Voluntary disclosure, litigation risk, cross-listing, Morrison ruling, bonding

JEL Classification: G15, G18, M41

Suggested Citation

Naughton, James P. and Rusticus, Tjomme O. and Wang, Clare and Yeung, Ira, Private Litigation Costs and Voluntary Disclosure: Evidence from the Morrison Ruling (February 2017). Available at SSRN: https://ssrn.com/abstract=2432371 or http://dx.doi.org/10.2139/ssrn.2432371

James P. Naughton

University of Virginia, Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Tjomme O. Rusticus

University of Minnesota ( email )

Carlson School of Management
321 19th Avenue South, Room 3-122
Minneapolis, MN 55455
United States

Clare Wang (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Ira Yeung

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
647
Abstract Views
3,844
rank
49,783
PlumX Metrics