Abstract
Existing research shows that shareholder pressures can shorten firms’ investment horizons. Yet studies have so far been limited to the actions shareholders take directly toward a focal firm. Considering that shareholder pressures may spill over between organizations, we argue that firms shorten their investment horizons following shareholder-initiated lawsuits against their peers in an effort to boost their short-run performance and preempt being sued themselves. We further posit that the negative relationship between this form of litigation threat and a firm’s investment horizon is weakened among firms with more long-term shareholders or future-focused CEOs, both of which guard against managers becoming overly short-term oriented. An examination of 18 years of shareholder litigation data supports our theory. This study highlights shareholder litigation as a distinct form of shareholder voice and one that is sufficiently potent to create spillover effects between firms.
Original language | English (US) |
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Pages (from-to) | 229-247 |
Number of pages | 19 |
Journal | Strategy Science |
Volume | 9 |
Issue number | 3 |
DOIs | |
State | Published - Sep 2024 |
All Science Journal Classification (ASJC) codes
- Business and International Management
- Strategy and Management
- Management Science and Operations Research
- Management of Technology and Innovation