Litigation Risk and Agency Costs: Evidence from Nevada Corporate Law
利用2001年内华达州限制高管个人法律责任的法规变化，研究发现该变化降低了公司价值、高管薪酬绩效敏感性和运营绩效，增加了错误重述，表明高管诉讼风险是重要的治理机制。
In 2001, Nevada significantly limited the personal legal liability of corporate officers and directors. We use this exogenous shock to implement a differences-in-differences design that examines the impact of officer and director litigation risk on agency costs. We find decreased firm value, especially for firms with lower levels of investor protection and the highest expected agency costs. We also find that managerial incentives are reduced as measured by lower chief executive officers’ pay-for-performance sensitivity. Finally, we find an adverse impact on operating performance and increased error-based restatements for Nevada firms subsequent to the change. Our findings emphasize that officer and director litigation risk is an important governance mechanism.