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Litigation risk and investment policy


We use a unique hand-collected dataset on corporate litigation to empirically examine the relationship between litigation risk and investment policy. We document a positive relationship between litigation risk and total investments. Decomposing total investments into capital expenditure, and research and development expense, we find a positive relationship between litigation risk and capital expenditure. We also find a positive relationship between litigation risk and research and development expense. The results are robust to different measures of litigation risk.

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  1. Tobit model is a censored regression methodology. This technique is designed to estimate linear relationships between variables when there is either left- or right-censoring in the dependent variable. The results continue to hold under this methodology.


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Correspondence to James Malm.

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Malm, J., Adhikari, H.P., Krolikowski, M. et al. Litigation risk and investment policy. J Econ Finan 41, 829–840 (2017).

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  • Litigation risk
  • Capital expenditure
  • Research and development expense
  • Total investments

JEL Classification

  • G30
  • G34