Institutional monitoring through shareholder litigation

• 成果类型: Article
• 署名作者: Cheng, C. S. Agnes; Huang, Henry He; Li, Yinghua; Lobo, Gerald
• 署名单位: Purdue University System; Purdue University; Louisiana State University System; Louisiana State University; Texas A&M University System; Prairie View A&M University; University of Houston System; University of Houston
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2009.11.006
• 发表日期: 2010
• 页码: 356-383
• 关键词: CORPORATE GOVERNANCE; institutional investors; monitoring; SHAREHOLDER LITIGATION

摘要

This paper investigates the effectiveness Of using securities class action lawsuits in monitoring defendant firms by institutional lead plaintiffs from two aspects: (1) immediate litigation outcomes, including the probability of surviving the motion to dismiss and the settlement amount, and (2) subsequent governance improvement such as changes in board independence. Using a large sample of securities lawsuits from 1996 to 2005, we show that institutional investors are more likely to serve as the lead plaintiff for lawsuits with certain characteristics. After controlling for these determinants of having an institutional lead plaintiff, we show that securities class actions with institutional owners as lead plaintiffs are less likely to be dismissed and have larger monetary settlements than securities class actions with individual lead plaintiffs. This effect exists for various types of institutions including public pension funds. We also find that, after the lawsuit filings, defendant firms with institutional lead plaintiffs experience greater improvement in their board independence than defendant firms with individual lead plaintiffs. Our study suggests that securities litigation is an effective disciplining tool for institutional owners. (C) 2009 Elsevier B.V. All rights reserved.