Review of Corporate Litigation: Institutional Background, Theory, and Empirical Findings

This paper reviews research on corporate litigation with a focus on securities litigation, as it has been the most common type of corporate litigation in recent years. The legal and economics literature explain why settlements are more likely to take place in corporate lawsuits by analyzing the role of economic incentives, information asymmetry, agency cost, and transaction cost in the litigation process and settlement decisions. A large body of empirical research in multiple disciplines (law, economics, management, finance, and accounting, etc.) document evidence consistent with the theoretical explanations.