Corporate Litigation, Governance, and the Role of Law Firms
68 Pages Posted: 28 Sep 2021 Last revised: 3 Nov 2021
Date Written: October 4, 2021
Corporations pay out large settlements to their shareholders and other plaintiffs as compensation for corporate governance failures. Hired to achieve and improve settlements, plaintiff law firms can play a central role in litigation outcomes. We provide first systematic evidence of their performance. In our novel comprehensive dataset, top plaintiff law firms (“stars”) capture 48% larger settlements. Defendant corporations’ litigation insurance coverage is also 39% larger, suggesting assortative matching of stars with lawsuits that have ex-ante large expected payoffs. Stars’ visibility and information advantage vis-à-vis less sophisticated plaintiffs help sustain their market share.
Keywords: Corporate litigation, corporate governance, litigation insurance, securities litigation
JEL Classification: K41, G34, L43
Suggested Citation: Suggested Citation