Litigating Innovation: Evidence from Securities Class Action Lawsuits

Litigating Innovation: Evidence from Securities Class Action Lawsuits

Oliver Spalt, Elisabeth Kempf

Series number :

Serial Number: 
614/2019

Date posted :

July 12 2019

Last revised :

December 09 2019
SSRN Share

Keywords

  • Corporate governance • 
  • law and economics • 
  • innovation • 
  • Patents • 
  • shareholder litigation • 
  • Class Action Lawsuit

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.

Authors

Real name:
Elisabeth Kempf