Corporate litigation and executive turnover

Joseph Aharony, Chelsea Liu and Alfred Yawson

Journal of Corporate Finance, 2015, vol. 34, issue C, 268-292

Abstract: We examine executive turnover following environmental, antitrust, intellectual property (IP), and contractual lawsuits filed against their companies. We find that companies' responses to lawsuits depend on the nature of the allegations. In particular, contractual lawsuits are followed by increased turnover of CEOs and inside directors, whereas following environmental and IP lawsuits, only outside directors tend to depart. Antitrust lawsuits are followed by increased appointments of inside directors. We also find that lawsuit merit and pecuniary demands for damages play a role in determining executive turnover. In addition, we find some evidence of reduced CEO compensation following lawsuits. Overall, we provide insights into the effectiveness of the executive labor market in responding to alleged corporate wrongdoing.

Keywords: Corporate governance; Corporate litigation; Executive turnover; Board of directors; Lawsuits (search for similar items in EconPapers)
JEL-codes: G34 M12 M14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:34:y:2015:i:c:p:268-292

DOI: 10.1016/j.jcorpfin.2015.07.009

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