Securities Litigation and Stock Returns: an Event Study

Konferenzbeitrag

This paper executes a simple event study of the effects of securities litigation on stock returns. Securities litigation is a common occurrence on the US investment markets, via which shareholders aim to recover losses they have suffered as a result of managerial misconduct. Filing lawsuits, however, signals to the market in general that there is something wrong with the company, unless the market knows it already. In that case, litigation may have negative consequences on future stock returns of the company. Applying t-tests, this paper tests this hypothesis and finds that significant negative stock reaction to litigation is present but not overwhelmingly. Positive reaction to lawsuits can sometimes be observed. Negative reaction, however, is twice as common as positive reaction to lawsuits. Shareholders should not be concerned that filing a securities lawsuit will necessarily result in stock return declines.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Year: 2009 ; Conference: International Conference Managerial Solution for global & local markets during the crisis, Nessebar 9-12 September 2009 ; Kiel, Hamburg: ZBW - Leibniz Information Centre for Economics

Classification and Topics

• Classification: Wirtschaft
• Subject: shareholder litigation ; event study ; pulse dummies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kalchev, Georgi
• Event: Veröffentlichung
• (who): ZBW - Leibniz Information Centre for Economics ; ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/148358
• Last update: 10.03.2025, 11:41 AM CET