Do Courts Matter for Firm Value? Evidence from the U.S. Court System

79 Pages Posted: 5 Nov 2015 Last revised: 17 Sep 2020

See all articles by Stefano Colonnello

Stefano Colonnello

Ca Foscari University of Venice; Halle Institute for Economic Research

Christoph Herpfer

Emory University - Goizueta Business School

Date Written: May 11, 2020

Abstract

We estimate how U.S. state courts impact firm value by exploiting a U.S. Supreme Court ruling that exogenously changed firms' exposure to different courts. We find that increased exposure to more business-friendly courts is associated with positive announcement returns. We find no such association for objective court quality. Consistent with the ruling impacting firm value through the legal environment channel, we find that effects are stronger for firms with high litigation exposure. We find that the ruling led to a shift in both the geographic distribution of lawsuits and operations of firms.

Keywords: Courts, Litigation, Governance

JEL Classification: G32, G34, G38, K40

Suggested Citation

Colonnello, Stefano and Herpfer, Christoph, Do Courts Matter for Firm Value? Evidence from the U.S. Court System (May 11, 2020). Paris December 2016 Finance Meeting EUROFIDAI - AFFI, Available at SSRN: https://ssrn.com/abstract=2686621 or http://dx.doi.org/10.2139/ssrn.2686621

Stefano Colonnello (Contact Author)

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Christoph Herpfer

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
354
Abstract Views
2,454
rank
116,424
PlumX Metrics