Proximity and litigation: Evidence from the geographic location of institutional investors

Mieszko Mazur, Galla Salganik-Shoshan, Thomas Walker, Jun Wang

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

In this paper, we examine how the geographic distance between a firm and its largest institutional investors affects the firm's litigation risk. We show that geographic proximity between the firm and its largest institutional shareholders reduces the incidence of a lawsuit. Moreover, we find that geographic proximity affects the relationship between institutional investors’ ownership and the litigation risk of their portfolio firms. These findings indicate that geographically proximate investors may have an informational advantage over investors who are located far away, and that this advantage manifests itself in more effective monitoring of firm management, and consequently, in lower litigation risk.

Original languageEnglish
Pages (from-to)60-74
Number of pages15
JournalJournal of Financial Markets
Volume40
DOIs
StatePublished - 1 Sep 2018

Keywords

  • Corporate governance
  • Geography
  • Institutional investors
  • Litigation
  • Monitoring

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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