Securities class actions in the US banking sector: Between investor protection and bank stability

Lucia Dalla Pellegrina and Margherita Saraceno

Journal of Financial Stability, 2011, vol. 7, issue 4, 215-227

Abstract: This paper investigates whether securities class actions (SCAs) can play a role in banking supervision, both as a warning signal of insolvency and as an instrument of market discipline to encourage bank managers to carefully evaluate risk. Two groups of US banks are compared over the 2000â2008 period. One includes banks that have faced at least one SCA, while the other is composed of non-targeted banks (control group). Results indicate that collective private litigation procedures are more frequently directed at financially fragile intermediaries exhibiting inadequate governance standards. Furthermore, banks which have been subjected to SCAs are likely to reduce their excessive risk positions. This supports the idea that SCAs could be efficiently employed as a complement to public supervisory activity in the banking sector.

Keywords: Securities; class; action; Bank; safety; Market; discipline (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308910000446
Full text for ScienceDirect subscribers only

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:eee:finsta:v:7:y:2011:i:4:p:215-227

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().