Enterprise litigation risk and risk taking

Abstract

As a significant uncertainty in business operations, litigation risk negatively impacts corporate reputation and increases corporates' risk-taking. This paper explores the impact of litigation risk on corporate risk-taking. The study finds that: the more significant the amount of litigation involved and the higher the litigation risk, the greater the corporate risk-taking; the higher the analyst concern, the smaller the role of corporate litigation risk in enhancing corporate risk-taking; and the mediation test finds that firms with higher litigation risk can increase corporate financing constraints and negatively affect corporate risk-taking.