Which companies pay more (or less) in legal fees? An empirical study of India

Srinivasan Sankaraguruswamy and Umakanth Varottil

International Review of Law and Economics, 2023, vol. 75, issue C

Abstract: Although the demand for corporate legal services has grown significantly, so has the pressure on companies to reduce legal costs, thereby necessitating a “data-and-metrics” driven approach to legal fees. Accordingly, we exploit the availability of a unique dataset comprising legal fees that Indian corporations have spent over a 30-year period from 1990 to 2020. We undertake the first cross-sectional analysis of legal fees across various exploratory variables over a long period of time. The results show an increasing trend in the quantum of legal fees incurred by Indian companies during the period. They overwhelmingly suggest that large companies (measured along the lines of total assets, industry segmentation, export and import orientation) spend a higher quantum in legal fees than do small companies. Legal costs are higher for companies that undertake capital raising or mergers and acquisitions transactions in a given financial year than those that do not experience such events. Finally, legal fees tend to be higher in certain industry sectors such as technology and energy where significant contracting, regulatory or other form of legal work is pervasive. It is our expectation that the results and accompanying data analysis will aid purchasers of legal services (being corporations and their in-house legal departments) as well as providers (being law firms and legal professionals) in planning and budgeting for legal fees, and also in devising and implementing appropriate fee arrangements.

Keywords: Legal fees; India; Significant corporate event; Legal risk; Law firms (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:75:y:2023:i:c:s0144818823000169

DOI: 10.1016/j.irle.2023.106138

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