Finance

Algorithm

Shareholder

Physics

Accounting

Ex-ante

Macroeconomics

Corporate social responsibility

Business

Litigation risk analysis

Economics

Political science

Law and economics

Audit

Acoustics

Ninth

Class action

Shareholder value

Corporate governance

Computer science

State (computer science)

Journal of Financial and Quantitative Analysis

This research examines the relation between shareholder litigation and corporate social responsibility (CSR). Exploiting exogenous changes in shareholder litigation rights following the staggered adoption of universal demand laws by U.S. states and the Ninth Circuit Court of Appeals’ ruling on securities class action lawsuits, we show that weaker shareholder litigation rights lead to lower CSR scores. Moreover, the relation is stronger for firms facing higher litigation risk, and a decreased CSR score enhances firm value. Our evidence suggests that firms engage in CSR activities partly to reduce shareholder litigation risk ex ante and mitigate its consequences ex post.

Shareholder Litigation and Corporate Social Responsibility