Do All Securities Class Actions Have the Same Merit? A Stock Market Perspective

Charmen Loh () and R. S. Rathinasamy ()
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Charmen Loh: Rider University, Lawrenceville, NJ 08648, USA
R. S. Rathinasamy: Ball State University, Muncie, IN 47306, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2003, vol. 06, issue 02, 167-178

Abstract: Securities and Exchange Commission Rule 10(b)-5 makes it unlawful for companies to make misleading statements about their prospects or to omit the disclosure of negative information. Our examination of 290 Rule 10(b)-5 lawsuits filed in the 1996–1998 period yielded two important results. First, stocks of the defendant companies, in the aggregate, experience significant declines around the time of the first filing of lawsuits. Second, not all cases have the same merit, for among the reasons that prompted the filing of class-action litigation, only four groups — those that involve accounting irregularities, fraud, making overly optimistic statements, and failure to disclose negative news — result in the most significant filing-date stock declines.

Keywords: SEC rule 10(b)-5 violations; class action lawsuits and stockholder; wealth effects (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2003
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0219091503001031

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