Personal Liabilities and Corporate Innovation
Speaker: Hong Zou, University of Hong Kong
| Topic: | Personal Liabilities and Corporate Innovation |
| Date: | May 15, 2017 |
| Venue: | Room 502, Daoyuan Building, CUHK(SZ) |
| Speaker: |
Hong Zou University of Hong Kong |
| Detail/Abstract: | We exploit the sudden change in Nevada’s Corporate Law in 2001 that significantly lowered directors’ and officers’ (D&O) legal liability to study whether D&O legal liability affects corporate innovation. We find that firms incorporated in Nevada before the law change exhibit an increase in innovation measured by the number of patents and non-self-citations relative to matched control firms. In addition, we find that the effect is stronger for firms facing higher litigation risk or firms operating in more R&D-intensive industries, and for explorative innovations that are riskier. Therefore, imposing legal liabilities on D&Os may entail a cost: litigation risk may inhibit corporate innovation. |
