Does litigation risk matter for managers’ asymmetric cost behavior?

Kyeongheum Ra and Grace Goun Kim

Finance Research Letters, 2023, vol. 53, issue C

Abstract: This study examines the effect of litigation risk on firms’ asymmetric cost behavior. Using data on filings of securities class action lawsuits from 1999 to 2019, we find that firms’ asymmetric cost behavior increases with higher litigation risk. Furthermore, we find that the effect of litigation risk on cost stickiness is more pronounced in (1) labor-intensive firms, and (2) high-tech industries. Our study contributes to the literature by suggesting that litigation risk is a valuable determinant affecting firms’ asymmetric cost behavior.

Keywords: Asymmetric cost behavior; Litigation risk; Labor intensity (search for similar items in EconPapers)
JEL-codes: G10 K22 M41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007954

DOI: 10.1016/j.frl.2022.103619

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