Competition and the Reputational Costs of Litigation
Copyright policy )Competition and the Reputational Costs of Litigation
AbstractWe study the role of competition in customers’ reactions to litigation against firms, using anonymized mobile phone location data. A class action lawsuit filing is followed by a 4% average reduction in customer visits to target firms’ outlets in the following months. The effect strongly depends on competition. Outlets facing more competition experience significantly larger negative effects. Closer competition matters more, both in terms of geographic and industry proximity. Announcement returns and quarterly accounting revenues around lawsuit filings also strongly depend on competition. Our results suggest that competition is an important component in customers’ ability to discipline firms for misbehavior.
- Tilburg University Netherlands
- European Corporate Governance Institute Belgium
- Swiss Finance Institute Switzerland
- University of Zurich Switzerland
- University of St. Gallen Switzerland
1402 Accounting, 330, reputational costs, finance, 10003 Department of Finance, 2002 Economics and Econometrics, economics, class action lawsuits, class action lawsuits, corporate misbehavior, competition, reputational costs, 330 Economics, 2003 Finance, corporate misbehavior, competition
1402 Accounting, 330, reputational costs, finance, 10003 Department of Finance, 2002 Economics and Econometrics, economics, class action lawsuits, class action lawsuits, corporate misbehavior, competition, reputational costs, 330 Economics, 2003 Finance, corporate misbehavior, competition
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