This paper provides another test of the litigation hypothesis proposed by Hall and Stammerjohan (1997) and provides evidence that subtle differences in the underlying business environment may be very important in predicting the accounting reaction of management to major events. The litigation...

This paper examines the relationship between the incidence of litigation events with potentially large damage awards and managers' accounting choices. We argue that the size of damage awards is a function of reported net income and net worth, and that this relationship provides management an...