Examining Corporate Litigation: Market Reactions, Resource Allocation, and Trial Outcomes

This dissertation aims to provide a preliminary examination of corporate litigation using a unique hand-collected sample of 262 corporate lawsuits involving 72 publicly-traded organizations listed on the Toronto Stock Exchange.The first set of studies explores how the market reacts when organizations go to court to resolve a lawsuit. Unlike previous U.S.-focused studies, no significant relation between abnormal market returns, the trial, and the subsequent court decision was found. These results suggest that the Canadian stock market, on average, does not perceive litigation as a significant event.The second set of studies explores how financial resources, in-house litigation ability and the chief legal officer interact to increase the organization's odds of winning the trial. Results did not support the hypotheses that trial outcomes are influenced by the financial size of the organization nor by the in-house litigation ability. However, there was evidence that the relationship between an organization's financial resources and the odds of winning were mediated by the internal litigation ability. Since the direct effects were non-significant, this result should be considered with caution. The hypothesis of a moderating relationship between the CLO and in-house litigation ability was not supported; instead, evidence of a (weak) interaction was found between these two variables.The findings from both sets of studies challenge the economic model of litigation that is predominant in the management literature. Recommendations for future research include extending the sample to include decisions from administrative tribunals and during the process to develop a better understanding of how organizations mobilize the legal system to improve organizational performance.