The effect of securities litigation risk on firm value and disclosure

• 成果类型: Article
• 署名作者: Donelson, Dain C.; Hutzler, Christian M.; Monsen, Brian R.; Yust, Christopher G.
• 署名单位: University of Iowa; University System of Ohio; Ohio State University; Texas A&M University System; Texas A&M University College Station
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12960
• 发表日期: 2024
• 页码: 1785-1818
• 关键词: CORPORATE GOVERNANCE; randomization inference; SHAREHOLDER LITIGATION; ANALYST COVERAGE; Textual analysis; REFORM ACT; investors; IMPACT; matter; FRAUD

摘要

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.