Securities Litigation and Stock Returns: an Event Study

Georgi Kalchev

EconStor Conference Papers from ZBW - Leibniz Information Centre for Economics

Abstract: 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.

Keywords: shareholder litigation; event study; pulse dummies (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/148358/1/eventStudy2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:esconf:148358

Access Statistics for this paper

More papers in EconStor Conference Papers from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().