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Technology companies and accounting lawsuits

Larry Ribstein:

Most disturbingly, the article [a WSJ article on securities class actions, which rose in number by 16 percent in 2004] points out that "technology companies almost by definition are more susceptible to lawsuits challenging their books." That's because many suits are based on accounting problems, specifically including revenue recognition issues, to which tech companies are most prone.

The fact that a particular industry is especially subject to lawsuits by its very nature would seem to be a problem, unless there's something inherently wrong with the industry. Why should we want to subject tech companies to a litigation tax?



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.