Shareholder Lawsuits and Ownership Structure

Abstract

This paper examines shareholder litigation activity in the backdrop of corporate ownership structure. The main insight of this paper is that shareholder litigation and ownership structure appear to be substitute mechanisms in disciplining management. Partly consistent with this notion, empirical results suggest that lawsuit-defendant firms have fewer outside blockholders, a lower percentage of unaffiliated blockholdings, and a lower blockholdings-to-blockholders ratio than a set of control firms.