Jagannathan, M and Delhi, V S K (2023) Decoding a construction organisation's tendency to litigate: An understanding through financial statements. Built Environment Project and Asset Management, 13(3), pp. 453-470. ISSN 2044-124X
Abstract
Purpose: Despite the availability of amicable means to resolve construction disputes, litigation remains a mainstream dispute resolution process in some countries. This tendency to litigate (TTL) calls for research to develop appropriate precautions to encourage stakeholders to resolve most commercial disputes through alternate dispute resolution (ADR) techniques. While a claimant's TTL arise from the individual, project and organisation preferences, this study, which can benefit both potential claimants and employers by saving time and money on litigation, identifies a bidder's financial parameters that may increase its litigation propensities, as a first step towards aiding employers to incorporate precautions to discourage such tendencies. Design/methodology/approach: After the literature review, the theoretical construct proposed by Rachlinski's “framing theory of litigation” (based on Kahneman and Tversky's Prospects Theory) is used to explain organisation-level litigation decision-making. The study sources data from the financial statements of Indian construction/real estate firms, followed by panel regression analysis to test the theoretical construct's validity. Findings: The results show that the TTL (risk-seeking behaviour) generally increases with a lower value of sales, higher assets and profitability. Interestingly, organisation-level cash flow shows an insignificant influence on litigation tendencies. Practical implications: Knowing which financial parameters may increase litigation tendencies could help employers evaluate a bidder's propensity to litigate project disputes. Originality/value: Researchers use financial statements to explore correlations among financial variables. However, in the construction context, there are no empirical studies with data from construction firms to understand potential litigation expenses compared to specific financial ratios.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction; financial statements; litigation; organisation |
| Index terms: | regression analysis, construction dispute, financial ratio, resolution, preference, profitability, real estate, empirical study, bidder, decision-making, methodology, validity, litigation, framing, construction firm, dispute, literature review, cash flow, construction organization |
| Subjects: | decision analysis, conflict resolution, statistical analysis, decision-making and reasoning, research methods, financial management, real estate economics, economic analysis, data analysis and analytics, conceptual models, bidding, organization, evaluation and assessment methods, dispute resolution |
| Topics: | Stakeholder Management, Risk Management, Procurement, Business Strategy, Cost Management, Research Practice, Urban Studies, Legal Issues |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here