Competition and the reputational costs of litigation

Item Type Monograph (Working Paper)
Abstract We study the role of competition in customers’ reactions to litigation against firms, using anonymized mobile phone location data. A class action lawsuit filing results in a 4% average reduction in customer visits to target firms’ outlets in the following months. The effect strongly depends on competition. Outlets facing more competition experience significantly larger negative effects. Closer competition matters more, both in terms of geographic and industry proximity. Announcement returns and quarterly accounting revenues around lawsuit filings also strongly depend on competition. Our results suggest that competition is an important component in customers’ ability to discipline firms for misbehavior.
Authors von Meyerinck, Felix; Pursiainen, Vesa & Schmid, Markus
Language English
Keywords class action lawsuits, corporate misbehavior, competition, reputational costs
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area SOF - System-wide Risk in the Financial System
Refereed Yes
Date April 2021
Contact Email Address
Depositing User Beatrix Kobelt-Glock
Date Deposited 20 Apr 2021 07:08
Last Modified 20 Jul 2022 17:45


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von Meyerinck, Felix; Pursiainen, Vesa & Schmid, Markus: Competition and the reputational costs of litigation. , 2021,

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