What is the source of "home teams" doing better? One source is possibly that in the event of a court case, domestic courts are more likely to side with firms from the home country. That is the main finding of Bhattacharya, Galpin, and Haslem.
They examine foreign firms that are involved with US firms in court cases. The authors find that the market takes this bias into account when reacting to announcements of the lawsuit.
A few quick "look-ins":
- "The purpose of this paper is to bring methodologies from financial economics to address whether foreign firms do indeed have a disadvantage in U.S. courts or, to put it another way, whether U.S. firms have a home court advantage in their own country’s courts."
- "We document that there is an abnormal share price drop for the defendant firm in its home market at the announcement of litigation. This drop, however, is less for the U.S. corporate defendant than it is for the foreign corporate defendant. The difference is economically and statistically significant, and it remains whether we match by year, industry, type of litigation, size or profitability."
- "...if the case goes to trial, U.S. defendant firms are less likely to lose a U.S. federal
lawsuit than a matched foreign firm, matched by year, industry, type of litigation, size or profitability."
- "Some of these issues of equity may be structural (foreign firms have less skill in dealing with the U.S. justice system) or they may be bias (judges or juries are less sympathetic to foreign firms), and resolving which reason is more significant is beyond the scope of the paper."
Which deserves a wow!
Bhattacharya , Utpal, Galpin, Neal E. and Haslem, Bruce, "The Home Court Advantage in International Corporate Litigation" (February 2004). AFA 2006 Boston Meetings Paper http://ssrn.com/abstract=509008
(note the last paragraph was edited since initial publication. I screwed up.)