Green innovation and shareholder litigation rights

Sirimon Treepongkaruna, Chaiyuth Padungsaksawasdi

Research output: Contribution to journalArticlepeer-review

10 Citations (Web of Science)

Abstract

We rely on the staggered adoption of the Universal Demand Laws, which led to an exogenous decline in derivative litigation risk, as a quasi-natural experiment to explore the relation between shareholder-initiated litigation risk and a firm's green innovation. Consistent with the pressure hypothesis, we show that our difference-in-differences coefficient estimates implying that an exogenous reduction in the threat of derivative litigation economically and significantly reduces a firm's green innovation by 75 %. Making it harder for shareholders to file a lawsuit against top management intensifies agency costs, pressuring managers become more risk-averse and avoid investing in long-term projects such as green innovation.

Original languageEnglish
Article number105130
Number of pages7
JournalFinance Research Letters
Volume62
Issue numberA
Early online date23 Feb 2024
DOIs
Publication statusPublished - Apr 2024

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