The Impact of Litigation Risk on the Commission and Detection of Financial Misreporting

Allen H. Huang, Nafis Rahman, Cheng-Hsun Lee, Tracy Gu, Department of Accounting, The Hong Kong University of Science and Technology, Hong Kong, Faculty of Business and Economics, The University of Hong Kong, Hong Kong, College of Management, National Kaohsiung University of Science and Technology, AIA Group Ltd, Hong Kong

Journal of Accounting, Auditing & Finance

Published online on January 22, 2026

Abstract

Journal of Accounting, Auditing & Finance, Ahead of Print.
Although securities class action lawsuits are one of the most important disciplinary tools to curtail misreporting, studies on their role in financial misreporting suffer from a partial observability problem. This paper uses the US Supreme Court ruling in ...