Taking a Financial Position in Your Opponent in Litigation

• 成果类型: Article
• 署名作者: Choi, Albert H.; Spier, Kathryn E.
• 署名单位: University of Virginia; Harvard University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20161863
• 发表日期: 2018
• 页码: 3626-3650
• 关键词: FAVORED-NATION CLAUSES; settlement; COSTS; distress

摘要

Before filing suit, a plaintiff can take a financial position in a defendant firm. A short position benefits the plaintiff by transforming a negative expected-value claim into a positive expected-value one and by enhancing the claim's settlement value. If the capital market is less than strong-form efficient, the plaintiff also benefits directly from the decline in the defendant's stock price. When the defendant is privately informed about the case's merits, bargaining failures can arise. While aggressive short-selling benefits the plaintiff at the expense of the defendant, moderate levels of short-selling can benefit the defendant and raise the settlement rate.