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

Mieszko Mazur (1) , Galla Salganik-Shoshan , Thomas Walker (2) , Jun Wang (3)

1 LEM - Lille économie management - UMR 9221
2 LSHTM - London School of Hygiene and Tropical Medicine
3 BGI - Beijing Genomics Institute [Shenzhen]

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.

Domaines: Sciences de l'Homme et Société; Gestion et management

Mieszko Mazur, Galla Salganik-Shoshan, Thomas Walker, Jun Wang. Proximity and litigation: Evidence from the geographic location of institutional investors. Journal of Financial Markets, 2018, 40, pp.60-74. ⟨10.1016/j.finmar.2018.05.002⟩. ⟨hal-02570949⟩