The home court advantage in international corporate litigation

Using a comprehensive sample of 2,361 public U.S. corporate defendants and 715 public foreign corporate defendants in U.S. federal courts in the period 1995-2000, we find that the market reaction at the announcement of a U.S. federal lawsuit is less negative for U.S. corporate defendants than for foreign corporate defendants. We find that this market reaction is rational; U.S. firms are less likely to lose than are foreign firms when we control for year, industry, type of litigation, size, and profitability. This finding may still reflect a sample selection bias. We control for this bias, and the results remain unchanged. We thus cannot rule out that U.S. firms have a home court advantage in U.S. federal courts.