Information bundling and securities litigation

Barbara A. Bliss, Frank Partnoy and Michael Furchtgott

Journal of Accounting and Economics, 2018, vol. 65, issue 1, 61-84

Abstract: We exploit the exogenous shock of a 2005 U.S. Supreme Court decision on securities class action loss causation requirements to examine two ways that firms bundle information with restatements: “positive bundling” of good news and “noise bundling” of additional bad news. We find that positive bundling offsets price declines and results in less litigation. In contrast, noise bundling magnifies price declines, but nevertheless deters litigation by confounding which bad news caused a decline. Non-bundled restatements are 5.94 times more likely to result in litigation. Bundled restatements have 8.17 times higher dismissal rates and $21.17 to $23.45 million lower settlement amounts.

Keywords: Information disclosures; Class-Action Securities Lawsuits; Litigation Risk; Earnings Restatements (search for similar items in EconPapers)
JEL-codes: G14 K22 K41 M41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:65:y:2018:i:1:p:61-84

DOI: 10.1016/j.jacceco.2017.11.013

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