Using 438 circuit court precedents, we construct a measure that captures the within-country variation in court leniency on securities law violations. Case-level analyses reveal that district courts heed home circuit precedents and are more likely to dismiss pending cases when their home circuits become more lenient. Firm-level analyses show that shareholders are less likely to sue misreporting firms residing in more lenient circuits. Finally, in more lenient circuits, firms are more likely to misreport and investors react less negatively to their restatement announcements. Our findings suggest that lenient precedents lower expected litigation costs and weaken the deterrence of shareholder litigation.​

JEL Classification: K22, K40, M41
Keywords: securities litigation, case law, case citation, circuit court, market reaction, misreporting, precedent, restatement​