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As financial firms incorporate impact strategies more extensively into their operations, they are asked to sustain their impact claims and thus face increased risks of regulatory scrutiny and lawsuits from private and public parties. The lack of reliable frameworks to measure impact gives rise to phenomena like impact washing, leading to litigations. This article aims to explore the main factors contributing to the impact litigation risk and the mechanisms employed by practitioners in the impact investing field to navigate and address this challenge.

We conducted semi-structured interviews involving three impact investors and three impact lawyers with specific knowledge of ESG and impact controversies, adopting the Gioia Methodology for the analysis. We triangulated such information with the analysis of secondary data.

The “great noise” around the impact investing world and the rise of impact washing, the lack of shared standards for measuring impacts and the misalignment of interests among actors involved in the initiatives constitute a potential “litigation bomb”. Such a scenario is detrimental to an investment strategy, which has the potential to tackle societal issues.

This study represents an initial effort to connect the academic debate on impact litigation with the expert’s active “on-field” standpoints. The identified and validated drivers of impact litigations provide valuable insight to enhance the governance and accountability of impact investing. Implementing Impact Measurement and Management (IMM) tools, participatory governance models, clear impact-focused contracts and a proactive approach could serve as prospective solutions to mitigate the risk of disputes.

This study aims to investigate whether firms purchase directors' and officers' liability (D&O) insurance when the country-level economic policy uncertainty (EPU) is high.

This study uses D&O insurance data from Chinese listed firms between 2003 and 2019 to conduct regression analyses to examine the association between D&O insurance and EPU.

The results show that government EPU, despite being an exogenous factor, increases the likelihood of firms' purchasing D&O insurance, and this effect is more pronounced when firms are exposed to great share price crash risk and high litigation risk, suggesting that firms intend to purchase D&O insurance possibly due to the accentuated stock price crash risk and litigation risk associated with EPU. In addition, the results indicate that the effect of EPU on the D&O insurance purchase decision is moderated by the provincial capital market development and internal control quality.

The study highlights the role of uncertain economic policies in shareholder approval of D&O insurance purchases.

The study enriches the literature on the determinants of D&O insurance purchases by documenting novel evidence that country-level EPU is a key institutional factor shaping firms' decisions to purchase D&O insurance.

The purpose of this paper is to examine whether managers of bankrupt firms are more or less conditionally conservative in their financial reporting relative to non-bankrupt firms. The study further examines the cross-sectional differences in conditional conservatism among bankrupt and non-bankrupt firms.

The study employs a sample of US firms to investigate conditional conservatism in firms that experience financial distress and go bankrupt relative to non-stressed non-bankrupt firms. The study also uses switching regression models to identify the drivers of the cross-sectional difference in conditional conservatism among bankrupt and non-bankrupt firms.

Empirical results show that bankrupt firms are timelier in recognizing bad news than good news when compared to non-bankrupt firms. The higher level of conditional conservatism in bankrupt firms is mainly driven by their higher levels of leverage and tax-reduction incentives. The cross-sectional analyses show that these results largely hold for more leveraged firms and firms with higher tax costs. Taken together, these results suggest that the conservative tendency of managers of bankrupt firms can stem from the agency problem between lenders and managers and from tax-decreasing motivations.

The novelty of the authors’ research stands in studying the drivers of the cross-sectional differences in conditional conservatism between bankrupt and non-bankrupt firms and specifically, the demonstration that taxation also induces conditional conservatism in the setting of ex post bankrupt firms.

This study aims to empirically evaluate the effectiveness of government auditing of local authorities’ compliance with the procurement rules.

A diff-in-diff approach is used where the measure of compliance is (changes in) the incidence of private litigation under the Public Procurement Act, in audited vs non-audited municipalities. Further, semi-structured interviews were conducted with chief procurement officials.

No statistically significant effect is found. While strong effects of audits can be ruled out, the statistical results and the interviews do not, however, contradict a modest but long-lasting effect.

Few studies have addressed the effect of public procurement auditing on compliance. This study develops an empirical framework and presents empirical results.