Green innovation and shareholder litigation rights

Sirimon Treepongkaruna and Chaiyuth Padungsaksawasdi

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: We rely on the staggered adoption of the Universal Demand Laws, which led to an exogenous decline in derivative litigation risk, as a quasi-natural experiment to explore the relation between shareholder-initiated litigation risk and a firm's green innovation. Consistent with the pressure hypothesis, we show that our difference-in-differences coefficient estimates implying that an exogenous reduction in the threat of derivative litigation economically and significantly reduces a firm's green innovation by 75 %. Making it harder for shareholders to file a lawsuit against top management intensifies agency costs, pressuring managers become more risk-averse and avoid investing in long-term projects such as green innovation.

Keywords: Green innovation; ESG; Universal Demand Laws, Litigation risk; Shareholder rights (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001600

DOI: 10.1016/j.frl.2024.105130

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