TY - JOUR
T1 - Green innovation and shareholder litigation rights
AU - Treepongkaruna, Sirimon
AU - Padungsaksawasdi, Chaiyuth
N1 - Publisher Copyright:
© 2024 Elsevier Inc.
PY - 2024/4
Y1 - 2024/4
N2 - 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.
AB - 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.
KW - ESG
KW - Green innovation
KW - Shareholder rights
KW - Universal Demand Laws, Litigation risk
UR - http://www.scopus.com/inward/record.url?scp=85185808496&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2024.105130
DO - 10.1016/j.frl.2024.105130
M3 - Article
AN - SCOPUS:85185808496
SN - 1544-6123
VL - 62
JO - Finance Research Letters
JF - Finance Research Letters
IS - A
M1 - 105130
ER -