Do the Merits Matter More? The Impact of the Private Securities Litigation Reform Act

Do the Merits Matter More? The Impact of the Private Securities Litigation Reform Act

This article examines the effect of the Private Securities Litigation Reform Act of 1995 (PSLRA) on stockholder lawsuits. We explore the role of restatements, earnings forecasts, and insider trading in the filing and resolution of lawsuits for a sample of high technology firms. Consistent with our p...

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Veröffentlicht in:Journal of law, economics, & organization economics, & organization, 2007-10, Vol.23 (3), p.627-652
Hauptverfasser: Johnson, Marilyn F., Nelson, Karen K., Pritchard, A. C.
Format: Artikel
Sprache:eng
Schlagworte:
Attorneys
Class action lawsuits
Earnings
Earnings forecasting
Financial reporting
Fraud
High tech industries
Insider trading
Law schools
Lawsuits
Legislation
Litigation
Plaintiffs
Plaintiffs attorneys
Scandals
Securities fraud
Securities trading
Studies
United States
Warnings
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Beschreibung
Zusammenfassung:This article examines the effect of the Private Securities Litigation Reform Act of 1995 (PSLRA) on stockholder lawsuits. We explore the role of restatements, earnings forecasts, and insider trading in the filing and resolution of lawsuits for a sample of high technology firms. Consistent with our predictions, there is a post-PSLRA shift away from litigation based on forward-looking earnings disclosures. Conversely, there is a significantly greater correlation between litigation and both earnings restatements and abnormal insider selling after the PSLRA. Finally, we find a post-PSLRA increase in the likelihood of settlement for cases involving earnings restatements.
ISSN:8756-6222
1465-7341
DOI:10.1093/jleo/ewm015