[{"title":"Securities Law Precedents, Legal Liability, and Financial Reporting Quality","date_updated":"2023-09-05T10:07:22Z","date_created":"2023-09-05T10:00:29Z","author":[{"first_name":"Benedikt","last_name":"Franke","full_name":"Franke, Benedikt"},{"full_name":"Huang, Allen","last_name":"Huang","first_name":"Allen"},{"full_name":"Li, Reeyarn","id":"102450","last_name":"Li","first_name":"Reeyarn"},{"last_name":"Wang","full_name":"Wang, Hui","first_name":"Hui"}],"year":"2023","jel":["G14","K22","K40","M41"],"citation":{"mla":"Franke, Benedikt, et al. <i>Securities Law Precedents, Legal Liability, and Financial Reporting Quality</i>. 2023.","short":"B. Franke, A. Huang, R. Li, H. Wang, Securities Law Precedents, Legal Liability, and Financial Reporting Quality, 2023.","bibtex":"@book{Franke_Huang_Li_Wang_2023, title={Securities Law Precedents, Legal Liability, and Financial Reporting Quality}, author={Franke, Benedikt and Huang, Allen and Li, Reeyarn and Wang, Hui}, year={2023} }","apa":"Franke, B., Huang, A., Li, R., &#38; Wang, H. (2023). <i>Securities Law Precedents, Legal Liability, and Financial Reporting Quality</i>.","chicago":"Franke, Benedikt, Allen Huang, Reeyarn Li, and Hui Wang. <i>Securities Law Precedents, Legal Liability, and Financial Reporting Quality</i>, 2023.","ieee":"B. Franke, A. Huang, R. Li, and H. Wang, <i>Securities Law Precedents, Legal Liability, and Financial Reporting Quality</i>. 2023.","ama":"Franke B, Huang A, Li R, Wang H. <i>Securities Law Precedents, Legal Liability, and Financial Reporting Quality</i>.; 2023."},"related_material":{"link":[{"url":"https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4254701","relation":"confirmation"}]},"language":[{"iso":"eng"}],"_id":"46804","user_id":"102450","abstract":[{"lang":"eng","text":"In common law systems, firms’ litigation risk depends both on written laws and how courts interpret these laws. Using 321 U.S. circuit court rulings, we introduce a novel measure capturing courts’ attitudes towards defendants in securities lawsuits. Our results confirm that financial misreporting firms in more defendant-friendly circuits face fewer lawsuits. Consistent with lower expected litigation costs, firms in these circuits face less negative market reactions when misreporting is revealed, invest less in preventing misreporting, and are more likely to engage in aggressive misreporting. We conclude that defendant-friendly precedents reduce firms’ legal liability and worsen their financial reporting quality.\r\n\r\n"}],"status":"public","type":"working_paper"},{"type":"journal_article","status":"public","_id":"46803","user_id":"102450","publication_status":"published","publication_identifier":{"issn":["0021-8456","1475-679X"]},"citation":{"bibtex":"@article{HUANG_HUI_Li_2019, title={Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk}, volume={57}, DOI={<a href=\"https://doi.org/10.1111/1475-679x.12260\">10.1111/1475-679x.12260</a>}, number={2}, journal={Journal of Accounting Research}, publisher={Wiley}, author={HUANG, ALLEN and HUI, KAI WAI and Li, Reeyarn}, year={2019}, pages={431–489} }","short":"A. HUANG, K.W. HUI, R. Li, Journal of Accounting Research 57 (2019) 431–489.","mla":"HUANG, ALLEN, et al. “Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk.” <i>Journal of Accounting Research</i>, vol. 57, no. 2, Wiley, 2019, pp. 431–89, doi:<a href=\"https://doi.org/10.1111/1475-679x.12260\">10.1111/1475-679x.12260</a>.","apa":"HUANG, A., HUI, K. W., &#38; Li, R. (2019). Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk. <i>Journal of Accounting Research</i>, <i>57</i>(2), 431–489. <a href=\"https://doi.org/10.1111/1475-679x.12260\">https://doi.org/10.1111/1475-679x.12260</a>","ieee":"A. HUANG, K. W. HUI, and R. Li, “Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk,” <i>Journal of Accounting Research</i>, vol. 57, no. 2, pp. 431–489, 2019, doi: <a href=\"https://doi.org/10.1111/1475-679x.12260\">10.1111/1475-679x.12260</a>.","chicago":"HUANG, ALLEN, KAI WAI HUI, and Reeyarn Li. “Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk.” <i>Journal of Accounting Research</i> 57, no. 2 (2019): 431–89. <a href=\"https://doi.org/10.1111/1475-679x.12260\">https://doi.org/10.1111/1475-679x.12260</a>.","ama":"HUANG A, HUI KW, Li R. Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk. <i>Journal of Accounting Research</i>. 2019;57(2):431-489. doi:<a href=\"https://doi.org/10.1111/1475-679x.12260\">10.1111/1475-679x.12260</a>"},"intvolume":"        57","page":"431-489","date_updated":"2023-09-05T10:07:10Z","oa":"1","author":[{"last_name":"HUANG","full_name":"HUANG, ALLEN","first_name":"ALLEN"},{"first_name":"KAI WAI","last_name":"HUI","full_name":"HUI, KAI WAI"},{"first_name":"Reeyarn","id":"102450","full_name":"Li, Reeyarn","last_name":"Li"}],"volume":57,"main_file_link":[{"open_access":"1","url":"https://onlinelibrary.wiley.com/doi/full/10.1111/1475-679X.12260"}],"doi":"10.1111/1475-679x.12260","publication":"Journal of Accounting Research","abstract":[{"text":"<jats:title>ABSTRACT</jats:title><jats:p>Drawing on the political theory of judicial decision making, our paper proposes a new and parsimonious ex ante litigation risk measure: federal judge ideology. We find that judge ideology complements existing measures of litigation risk based on industry membership and firm characteristics. Firms in liberal circuits (the third quartile in ideology) are 33.5% more likely to be sued in securities class action lawsuits than those in conservative circuits (the first quartile in ideology). This result is stronger after the U.S. Supreme Court's ruling in the <jats:italic>Tellabs</jats:italic> case. We next show that the effect of judge ideology on litigation risk is greater for firms with more sophisticated shareholders and with higher expected litigation costs. Furthermore, judicial appointments affect litigation risk and the value of firms in the circuit, highlighting the economic consequences of political appointments of judges. Finally, using our new measure, we document that litigation risk deters managers from providing long‐term earnings guidance, a result that existing measures of litigation risk cannot show.</jats:p>","lang":"eng"}],"keyword":["Economics and Econometrics","Finance","Accounting"],"language":[{"iso":"eng"}],"issue":"2","year":"2019","publisher":"Wiley","date_created":"2023-09-05T09:58:36Z","title":"Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk"}]