Litigation Risk and Voluntary Disclosure: Evidence from Legal Changes

Joel F. Houston, Chen Lin, Sibo Liu, Lai Wei

Research output: Contribution to journalJournal articlepeer-review

64 Citations (Scopus)


This paper documents that changes in litigation risk affect corporate voluntary disclosure practices. We make causal inferences by exploiting three legal events that generate exogenous variations in firms' litigation risk. Using a matching-based fixed-effect difference-in-differences design, we find that the treated firms tend to make fewer (more) management earnings forecasts relative to the control firms when they expect litigation risk to be lower (higher) following the legal event. The results are concentrated on the earnings forecasts conveying negative news and are robust to alternative specifications, samples, and outcome variables.
Original languageEnglish
Pages (from-to)247–272
Number of pages26
JournalAccounting Review
Issue number5
Publication statusPublished - 1 Sept 2019

User-Defined Keywords

  • earnings forecasts
  • litigation risk
  • shareholder protection


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