Foreign ownership and corporate litigation risk

Chen, X. ORCID: https://orcid.org/0000-0002-0597-4352, Wu, C. and Xie, X. (2025) Foreign ownership and corporate litigation risk. Journal of Business Research, 189. 115194. ISSN 1873-7978 doi: 10.1016/j.jbusres.2025.115194

Abstract/Summary

This study examines the impact of foreign ownership on a firm’s litigation risk. Drawing on corporate governance and signaling perspectives, we propose that foreign ownership functions as a monitoring mechanism, enhancing corporate governance, while also signaling to potential litigants that the focal firm may be more costly and challenging to litigate against. Therefore, foreign ownership helps mitigate litigation risk. Importantly, we emphasize the heterogeneity of foreign ownership by distinguishing between foreign institutional and corporate ownership, as well as considering the country of origin of foreign investors. Additionally, we find that a firm’s analyst coverage and outward internationalization can substitute for the impact of foreign ownership. These findings contribute to international business and corporate litigation literature by unpacking the deterrent effect of foreign ownership on litigation risk.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/120286
Identification Number/DOI	10.1016/j.jbusres.2025.115194
Refereed	Yes
Divisions	Henley Business School > International Business and Strategy
Publisher	Elsevier
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