The Effects of Blockchain Technology Adoption on Litigation Risks

ABSTRACT We investigate the relationship between the adoption of blockchain technology (BT) and corporate litigation risks. Our sample consists of 24,526 firm-year observations from firms listed on the Shenzhen and Shanghai Stock Exchanges during 2013–2021. We find that BT adoption is negatively associated with firms’ litigation risk. The results remain robust and consistent based on subsampling analysis, samples that use alternative specifications of BT adoption and litigation risk, with the use of instrumental variable two-stage least-squares regression, propensity score matching analysis, and after controlling for firm fixed effects. Further, we find that BT adoption can lead to a reduction in corporate litigation risks through an improvement in internal control mechanisms. The findings of our study enrich the literature on litigation risks faced by firms following BT adoption. They are relevant to corporate executives engaged in the advent of technological innovations, internal control systems, and risk management. Data Availability: Data are available from the public sources cited in the text.