The determinants of IPO-related shareholder litigation: The role of CEO equity incentives and corporate governance

Xingli Li, Kuntara Pukthuanthong, Marcus Glenn Walker and Thomas John Walker

Journal of Financial Markets, 2016, vol. 31, issue C, 81-126

Abstract: We examine how compensation and corporate governance mechanisms affect the occurrence of securities fraud and related shareholder litigation for initial public offering (IPO) firms. While prior research has focused on seasoned firms, we examine how CEO incentives and corporate governance in IPOs affect the incidence of IPO-related shareholder litigation. We find that the likelihood of securities fraud allegations increases with pre-IPO CEO equity incentives, suggesting a “dark side” to executive equity incentives. The risk of being sued is higher for firms whose boards are dominated by insiders, whose CEOs are older, have shorter tenure, or who founded the firm.

Keywords: Initial public offerings; CEO equity incentives; Corporate governance (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:31:y:2016:i:c:p:81-126

DOI: 10.1016/j.finmar.2016.09.003

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