In tort litigation, delayed settlement or impasse imposes high costs on the parties and society. Litigation institutions might influence social welfare by affecting the likelihood of out-of-court settlement and the potential injurers' investment in product safety. An appropriate design of...

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifiable performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

Litigation seems to be a Pareto-ineffcient outcome of pretrial bargaining; however, this paper shows that litigation can be the outcome of rational behavior by a litigant and her attorney. If the attorney has more information than his client concerning the characteristics of the lawsuit, the...

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifi- able performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...

Two risk-averse litigants with different subjective beliefs negotiate in the shadow of a pending trial. Through contingent contracts, the litigants can mitigate risk and/or speculate on the trial outcome. The opportunity for contingent contracting decreases the settlement rate and increases the...

This is the first comprehensive examination of the stock option backdating litigation. One reason why it is important to study the stock option backdating litigation is that it was a blend of financial reporting fraud and executive misappropriation of assets. Sometimes the executive...

After decades of declining litigation risk, independent directors of public companies are viewed as effectively immune to personal litigation costs. However, the unexpected In re Investors Bancorp decision by the Delaware Supreme Court in 2017 lowered the liability threshold only for directors...

Does personal litigation risk for independent directors materially affect firm valuation, compensation-related issues for independent directors, and board composition decisions? We use the unexpected In re Investors Bancorp decision in 2017 by the Delaware Supreme Court, which lowered the...

We study a contracting model with unforeseen contingencies in which the court is an active player. Ex-ante, the contracting parties cannot include the risky unforeseen contingencies in the contract they draw up. Ex-post the court observes whether an unforeseen contingency occurred, and decides...

In a system dominated by settlement, scholars, lawyers, and judges who want to promote accuracy in litigation strive to promote accurate settlements. This effort typically relies on judicial intervention in pretrial practice, or on extrajudicial substitutes, to educate parties on the merits of...