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The impact of shareholder litigation risk on income smoothing
,
Qingjing Zhang
Review of Quantitative Finance and Accounting, Volume: 61, Issue: 4, Pages: 1379 - 1413
Swansea University Author:
Suntina Sun
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DOI (Published version): 10.1007/s11156-023-01193-w
Abstract
This paper investigates whether and how shareholder litigation influences income smoothing. Using the ruling of the Ninth Circuit Court of Appeals in 1999 as an exogenous shock to the threat of litigation, we find that the increasing difficulty of class action lawsuits decreases income smoothing. Th...
| Published in: | Review of Quantitative Finance and Accounting |
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| ISSN: | 0924-865X 1573-7179 |
| Published: |
Springer Science and Business Media LLC
2023
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| Online Access: |
Check full text
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa66614 |
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| Abstract: |
This paper investigates whether and how shareholder litigation influences income smoothing. Using the ruling of the Ninth Circuit Court of Appeals in 1999 as an exogenous shock to the threat of litigation, we find that the increasing difficulty of class action lawsuits decreases income smoothing. This finding is robust to different model specifications. We also show that such an effect is stronger for firms that are more likely to face greater pressure from the threat of shareholder litigation risk. Overall, our findings extend the literature on investigating how class action lawsuits can affect the motivation of income smoothing. |
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| Keywords: |
Shareholder litigation; Income smoothing; Earnings volatility; Class action lawsuits |
| College: |
Faculty of Humanities and Social Sciences |
| Funders: |
No funding was received for conducting this study. |
| Issue: |
4 |
| Start Page: |
1379 |
| End Page: |
1413 |