Measuring securities litigation risk

► Extant research commonly uses industry dummy variables to measure securities litigation risk. ► We report on the predictive ability of alternative models of litigation risk to assess the validity of these dummy variables. ► The industry measure alone does a relatively poor job of predicting litigation. ► Supplementing this variable with measures of other firm characteristics considerably improves predictive ability. ► Proxies for corporate governance quality and managerial opportunism do not add much to predictive ability.