The Spillover Effects of Class Actions on Joint Venture Partners

Firms faced with a class action lawsuit experience reputational and financial penalties. [1] However, research has focused solely on the consequences for the defendant and, to our knowledge, no studies have examined whether the repercussions of alleged malfeasance range beyond the company sued. Thus, it remains unexplored whether litigation risks extend beyond the sued firm and whether there are spillover risks associated with doing business with that firm.

Prior research has found that corporate culture, governance practices, and even bankruptcy risks extend beyond the traditional boundaries of firms that share directors or are linked with business partners through contracts. In … Read more