Dain C. Donelson, Christian M. Hutzler, Brian R. Monsen, Christopher G. Yust
{"title":"The effect of securities litigation risk on firm value and disclosure","authors":"Dain C. Donelson, Christian M. Hutzler, Brian R. Monsen, Christopher G. Yust","doi":"10.1111/1911-3846.12960","DOIUrl":null,"url":null,"abstract":"<p>Critics assert that securities class actions are economically burdensome and yield minimal recoveries, whereas proponents claim they deter wrongdoing. We examine key events in the recent Goldman Sachs Supreme Court case to test the net effect of securities litigation risk on shareholder value. We find that investors view securities class actions as value-increasing. However, the strength of this effect varies based on external monitoring. Investors view securities class actions as more value-enhancing when institutional ownership is low. We also use this setting to examine the effect of securities litigation risk on mandatory disclosure because the Goldman Sachs case focuses on mandatory disclosure properties. Using a difference-in-differences design, we find firm risk factor disclosures become shorter and less similar to industry peers, and they contain more uncertain and weak terms. Overall, our results show nuanced effects of securities litigation risk on shareholder value and firm disclosure.</p>","PeriodicalId":10595,"journal":{"name":"Contemporary Accounting Research","volume":null,"pages":null},"PeriodicalIF":3.2000,"publicationDate":"2024-07-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/1911-3846.12960","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Contemporary Accounting Research","FirstCategoryId":"91","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1911-3846.12960","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Critics assert that securities class actions are economically burdensome and yield minimal recoveries, whereas proponents claim they deter wrongdoing. We examine key events in the recent Goldman Sachs Supreme Court case to test the net effect of securities litigation risk on shareholder value. We find that investors view securities class actions as value-increasing. However, the strength of this effect varies based on external monitoring. Investors view securities class actions as more value-enhancing when institutional ownership is low. We also use this setting to examine the effect of securities litigation risk on mandatory disclosure because the Goldman Sachs case focuses on mandatory disclosure properties. Using a difference-in-differences design, we find firm risk factor disclosures become shorter and less similar to industry peers, and they contain more uncertain and weak terms. Overall, our results show nuanced effects of securities litigation risk on shareholder value and firm disclosure.
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.