In addition to reducing R&D investment and changing senior managers or corporate name, the significant uncertainty andreputation shock brought by civil litigation may also have a vital impact on corporate governance of the sued company. Weuse A-share listed companies in Shanghai and Shenzhen stock exchanges from 2011 to 2018 to empirically examine theimpact of civil litigation on corporate governance and its mechanism. It is found that, civil litigation is negatively correlatedwith corporate governance, and financing liabilities (FL) play an intermediary role in the negative correlation. Furthermore,judicial local protectionism weakens the negative correlation between civil litigation and corporate governance. Finally weclose with directions for future research
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