A Firm’s Decision to Settle a Securities Class Action Lawsuit: The Influence of CEO Prevention Focus and CEO Duality
研究了CEO预防焦点如何影响公司和解证券集体诉讼的时间和金额，发现当CEO兼任董事会主席时，预防焦点会促使更早和解且支付更高金额，以符合其规避损失的个人偏好。
Securities class action lawsuits filed against publicly traded firms are a widespread phenomenon. Such lawsuits threaten the sued firm’s performance and reputation, and their outcome may significantly impact the firm’s CEO’s career and reputation. However, there has been limited research by strategic management scholars on this issue, particularly regarding the firm’s decision to settle the lawsuit and the CEO’s influence on this process. We address this by examining whether, when, and how CEO prevention focus influences the firm’s strategic decision regarding when to settle, and for how much. By conducting content analysis of spoken text from the year leading up to the settlement agreement, we can more accurately assess the CEO’s prevention focus at the time the decision to settle was made. Our findings reveal that the influence of CEO prevention focus on the settlement time and the settlement amount is statistically significant when the CEO also serves as the chairperson of the board of directors, indicating that the decision-making authority associated with CEO duality enables prevention-focused CEOs to pursue the loss-minimizing strategies (earlier settlements and larger settlement amounts) that align with their personal preference for safety and security. We discuss the practical and policy implications of our findings.