The merits of securities litigation and corporate reputation

IF 3.2 3区 管理学 Q1 BUSINESS, FINANCE
Dain C. Donelson, Antonis Kartapanis, Christopher G. Yust
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Abstract

We explore how securities litigation affects corporate reputation. Experts remain concerned that nonmeritorious securities class actions—those that will be dismissed or settled for nuisance amounts—cause reputational damage. Although several prior studies show reputational costs for nonmeritorious cases, they generally use indirect measures based on returns or total market losses, which are mechanically associated with securities litigation elements. In contrast, we use a relatively direct reputation measure from Fortune's “Most Admired Companies” list. We find significant reputational damage after meritorious litigation, with the strongest cases having the largest effects. However, we find no evidence of reputational damage after nonmeritorious litigation. We also find that Fortune's reputational damage measure is associated with more negative returns around the litigation filing date. We show possible mechanisms for our results, as initial legal filings contain information allowing market participants to assess case merits. Our results imply that reputational damage is primarily due to fraud, which securities litigation helps reveal to the market, rather than litigation itself. Thus, reputational damage is not an issue in over 70% of securities class actions due to the high frequency of nonmeritorious cases.

Abstract Image

证券诉讼的利弊与企业声誉
我们探讨证券诉讼如何影响企业声誉。专家们仍然担心,非恶意证券集体诉讼--那些将被驳回或以微不足道的金额和解的诉讼--会造成声誉损失。尽管之前的一些研究显示了非恶意案件的声誉成本,但这些研究通常使用基于收益或市场总损失的间接衡量标准,而这些标准与证券诉讼要素机械地联系在一起。相比之下,我们使用《财富》杂志 "最受赞赏公司 "榜单中相对直接的声誉衡量标准。我们发现,在有理诉讼之后,声誉会受到重大损害,最强有力的案件影响最大。然而,我们没有发现证据表明非善意诉讼会造成声誉损害。我们还发现,《财富》杂志的声誉损害衡量标准与诉讼申请日前后更多的负收益相关。我们为我们的结果展示了可能的机制,因为最初的法律文件包含了允许市场参与者评估案件是非曲直的信息。我们的结果表明,声誉受损主要是由于欺诈,而证券诉讼有助于向市场揭示欺诈,而不是诉讼本身。因此,在超过 70% 的证券集体诉讼中,声誉损害并不是一个问题,原因是非胜诉案件的发生率很高。
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来源期刊
CiteScore
6.20
自引率
11.10%
发文量
97
期刊介绍: Contemporary Accounting Research (CAR) is the premiere research journal of the Canadian Academic Accounting Association, which publishes leading- edge research that contributes to our understanding of all aspects of accounting"s role within organizations, markets or society. Canadian based, increasingly global in scope, CAR seeks to reflect the geographical and intellectual diversity in accounting research. To accomplish this, CAR will continue to publish in its traditional areas of excellence, while seeking to more fully represent other research streams in its pages, so as to continue and expand its tradition of excellence.
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