2009/07/23 by Amar Gande, Craig M. Lewis · 134 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Accounting #Business #Class action #Corporate Finance and Governance #Corporate Insolvency and Governance #Corporate governance #Economics #Finance #Law #Law, Economics, and Judicial Systems #Lawsuit #Monetary economics #Political science #Shareholder #Stock (firearms)
paper · open access · doi:10.1017/s0022109009990202
published in Journal of Financial and Quantitative Analysis 44(4), 823-850 (Cambridge University Press)
openalex publication_date 2009/07/23 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
Abstract 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. We show that the more likely a firm is to be sued, the larger the partial anticipation effect (shareholder losses capitalized prior to a lawsuit filing date) and the smaller the filing date effect (shareholder losses measured on the lawsuit filing date). Our evidence suggests that previous research that typically focuses on the filing date effect understates the magnitude of shareholder losses, and that such an understatement is greater for firms with a higher likelihood of being sued.