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Can ‘delitigation’ transform an industry?

Gayle DeLong

The Quarterly Review of Economics and Finance, 2018, vol. 67, issue C, 245-254

Abstract: I investigate whether removing product liability – “delitigation” – affects a firm’s market value. This research sheds light on the influence of litigation risk on firm value. Using the vaccine industry as an example, I find the average market return to the licensing of a new vaccine increases after the passage of legislation that removed most product liability for vaccines. While average market return to the licensing of any new drug that a vaccine maker produced also increases, returns to drug firms that do not make vaccines remain the same after the legislation. Company risk-taking enhances market reaction to the announcement of a new vaccine. Delitigation appears to contribute to the transformation of vaccine makers.

Keywords: Product liability; Regulated industries; National Childhood Vaccine Injury Act (search for similar items in EconPapers)
JEL-codes: K3 L2 L5 (search for similar items in EconPapers)
Date: 2018
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