Shareholder initiated class action lawsuits: Shareholder wealth effects and industry spillovers
نویسندگان
چکیده
This paper documents significantly negative stock price reactions to shareholder initiated class action lawsuits. We find that shareholders partially anticipate these lawsuits based on lawsuit filings against other firms in the same industry and capitalize part of these losses prior to a lawsuit filing date. Consequently, we show that filing date effects understate the magnitude of shareholder losses on average by approximately a third. We demonstrate that prior expectations about the likelihood of being sued are important determinants of the losses anticipated prior to the filing of an actual lawsuit, and on the lawsuit filing date.
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