The Pricing Effects of Securities Class Action Lawsuits and Litigation Insurance
研究了证券集体诉讼中纠正性披露的价格反应如何受诉讼成本反馈效应影响，以及诉讼保险如何减少投资者对预期诉讼的定价需求，并改变诉讼环境对公司的影响。
The price reactions to corrective disclosures often serve as a benchmark for settlements in securities class action lawsuits. When the firm bears litigation costs, this benchmark creates a feedback effect that exacerbates the price reaction to news that contradicts managers’ earlier reports. Litigation insurance provides value in this setting by reducing the need for investors to price the effects of anticipated litigation. Insurance also affects how changes in the litigation environment impact the firm, with some changes having opposite effects on the frequency of lawsuits against uninsured and insured firms. The pricing behavior of rational investors eliminates the valuation impact of the portion of settlements paid to the investors, similar to dividends. The valuation impact of litigation arises from transaction costs, such as attorney fees, which the firm can mitigate by constraining misreporting and by purchasing insurance..