Shareholder Litigation and Corporate Innovation


Speaker:Gustavo Manso, UC Berkeley
Date: Tuesday 3 October 2017
Time: 13:45
Location: Pearson Teaching Room

Further details


We examine whether and to what extent shareholder litigation shapes corporate innovation. We use the staggered adoption of the universal demand (UD) laws in 23 states from 1989 to 2005. These laws impose obstacles against shareholders filing derivative lawsuits thereby significantly reducing a firm’s litigation risk. Following the passage of the UD laws, firms have invested more in R&D, produced more patents based on new knowledge and more patents in new technological classes, generated more patents that have a large number of citations, and achieved higher patent value. Our findings suggest that the external pressure imposed by shareholder litigation discourages managers from engaging in explorative innovative activities