Business Commons^™

Compensation Clawback Policies And Corporate Lawsuits, Matteo Arena, Nga Nguyen

Finance Faculty Research and Publications

Purpose

The purpose of this paper is to study the relation between compensation clawbacks and lawsuits and analyze how these two corporate disciplinary forces interact. This paper hypothesizes that by allowing firms to recoup compensation from managers who breach their fiduciary duty, clawbacks provide a form of discipline that potentially reduces the likelihood of managerial wrongdoing, which, in turn, lowers the risk of corporate lawsuits.

Design/methodology/approach

This paper identifies whether or not a company in the S&P 1500 had a clawback policy between 2007 and 2014 by searching the company filings and press releases. The authors also construct different proxies …

A Global Analysis Of Corporate Litigation Risk And Costs, Matteo P. Arena, Stephen P. Ferris

Finance Faculty Research and Publications

We analyze a unique hand-collected international sample of 475 corporate lawsuits involving 361 publicly-traded defendant firms headquartered in 16 developed countries to explore how country factors influence litigation risk, equity market value, lawsuit outcomes, and settlement costs. Unlike U.S.-focused studies, we do not find a significant relation between stock turnover, equity performance, and the probability of litigation. Defendant firms headquartered in civil law countries or countries with less efficient judiciary systems face lower litigation risk and costs as well as less share price decline at filing. Countries whose courts are less independent demonstrate a significant bias against foreign defendant firms.