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The impact of shareholder litigation risk on income smoothing

Yiwei Li, Wei Song, Suntina Sun Orcid Logo, Qingjing Zhang Orcid Logo

Review of Quantitative Finance and Accounting, Volume: 61, Issue: 4, Pages: 1379 - 1413

Swansea University Author: Suntina Sun Orcid Logo

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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...

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Published in: Review of Quantitative Finance and Accounting
ISSN: 0924-865X 1573-7179
Published: Springer Science and Business Media LLC 2023
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URI: https://cronfa.swan.ac.uk/Record/cronfa66614
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last_indexed 2024-06-07T22:11:46Z
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spelling v2 66614 2024-06-07 The impact of shareholder litigation risk on income smoothing 2e8f85688626fa70d0386d0ccba4a30c 0000-0002-5056-9639 Suntina Sun Suntina Sun true false 2024-06-07 CBAE 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. Journal Article Review of Quantitative Finance and Accounting 61 4 1379 1413 Springer Science and Business Media LLC 0924-865X 1573-7179 Shareholder litigation; Income smoothing; Earnings volatility; Class action lawsuits 1 11 2023 2023-11-01 10.1007/s11156-023-01193-w COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Another institution paid the OA fee No funding was received for conducting this study. 2024-08-02T15:56:38.5394510 2024-06-07T22:57:55.2887896 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Yiwei Li 1 Wei Song 2 Suntina Sun 0000-0002-5056-9639 3 Qingjing Zhang 0000-0001-8239-0070 4 66614__31040__3e9346eb427440249da353032c73331d.pdf 66614.VoR.pdf 2024-08-02T15:55:01.6748024 Output 969600 application/pdf Version of Record true © The Author(s) 2023. This article is licensed under a Creative Commons Attribution 4.0 International License. true eng http://creativecommons.org/licenses/by/4.0/ 252
title The impact of shareholder litigation risk on income smoothing
spellingShingle The impact of shareholder litigation risk on income smoothing
Suntina Sun
title_short The impact of shareholder litigation risk on income smoothing
title_full The impact of shareholder litigation risk on income smoothing
title_fullStr The impact of shareholder litigation risk on income smoothing
title_full_unstemmed The impact of shareholder litigation risk on income smoothing
title_sort The impact of shareholder litigation risk on income smoothing
author_id_str_mv 2e8f85688626fa70d0386d0ccba4a30c
author_id_fullname_str_mv 2e8f85688626fa70d0386d0ccba4a30c_***_Suntina Sun
author Suntina Sun
author2 Yiwei Li
Wei Song
Suntina Sun
Qingjing Zhang
format Journal article
container_title Review of Quantitative Finance and Accounting
container_volume 61
container_issue 4
container_start_page 1379
publishDate 2023
institution Swansea University
issn 0924-865X
1573-7179
doi_str_mv 10.1007/s11156-023-01193-w
publisher Springer Science and Business Media LLC
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
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description 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.
published_date 2023-11-01T15:56:36Z
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score 11.035634

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