Large Market Declines and Securities Litigation: Implications for Disclosing Adverse Earnings News
研究发现市场大幅下跌时披露盈利消息会显著增加诉讼概率和和解金额，即使市场事件在法律上无关；有经验的法官更可能驳回此类案件，而管理者会避免在市场大跌时披露坏消息。
This study finds that large marketwide declines in stock prices are associated with higher litigation incidence and settlements even though marketwide events are legally irrelevant. The probability of litigation nearly doubles (from 0.29% to 0.55%) and the amount of settlements also doubles (from $5.0 million to $10.1 million) when earnings disclosures occur during a large market decline, even after controlling for the firm’s market-adjusted return. Furthermore, judges with (without) specialized experience in securities litigation are more (less) likely to dismiss cases triggered by disclosures during large market declines. This pattern is consistent with experienced judges recognizing and dismissing weaker cases. Finally, managers are less likely to disclose adverse news at the end of trading days with large market declines. Although we cannot definitively identify the motive behind this pattern, it is consistent with managers recognizing increased litigation risk during large market declines. This paper was accepted by Mary Barth, accounting.