The authors study how shareholder litigation risk impacts a firm’s decision of real earnings management (REM). This paper aims to shed light on how shareholder litigation risk impacts REM. The authors further explore how the intensifying effect varies systematically conditioning on the degree of information asymmetry and the strength of internal corporate governance.,In this study, the authors use the 1999 Ninth Circuit Court ruling as a quasi-experiment that reduces shareholder litigation risk to address endogeneity and establish a causal inference.,The difference-in-difference tests suggest lower shareholder litigation risk intensifies REM. In other words, higher litigation risk mitigates REM. Cross-sectional test results suggest the negative effect of decreased shareholder litigation is more pronounced when monitoring difficulty is higher, when information environment is more impoverished and when internal corporate governance is weaker. The negative effect is also stronger in firms with higher sensitivity to legal threats.,Protection of investors’ interest is the focus of corporate governance. Designed as an important corporate governance mechanism, shareholder litigation enables investors to pursue legal actions to recover their losses in the event of corporate misbehaviors. However, whether shareholder litigation is an effective corporate governance tool and beneficial to shareholders and firms is not without controversy. The authors contribute to the debate by providing evidence that supports the argument that shareholder litigation threat significantly disciplines REM, a form of costlier earnings management technique and myopic investment behavior.

中文翻译：

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股东诉讼风险与实际收益管理：因果关系推断

作者研究了股东诉讼风险如何影响公司的实际收益管理（REM）决策。本文旨在阐明股东诉讼风险如何影响REM。作者进一步探讨了强化效果如何系统地根据信息不对称程度和内部公司治理的强度而变化。在本研究中，作者使用1999年第九巡回法院的裁定作为准实验，将股东诉讼风险降低至解决内生性并建立因果关系推理。差异差异测试表明，较低的股东诉讼风险会加剧REM。换句话说，较高的诉讼风险可减轻REM。横断面测试结果表明，当监控难度更高时，减少股东诉讼的负面影响更加明显，当信息环境更加贫困并且内部公司治理较弱时。在对法律威胁具有较高敏感性的公司中，负面影响也更大。保护投资者利益是公司治理的重点。股东诉讼是一种重要的公司治理机制，旨在使投资者能够在公司行为不当时采取法律行动来弥补损失。但是，股东诉讼是否是有效的公司治理工具，是否对股东和企业有利，也并非没有争议。作者通过提供证据支持股东诉讼威胁严重约束REM（一种成本更高的收益管理技术和近视投资行为的形式）这一论点，为辩论做出了贡献。