The Value of the Class Action Mechanism in Emerging Markets: Insights from the First Special Representative Action in China
研究中国首例证券特别代表人诉讼（康美药业案）的市场反应，发现投资者认为集体诉讼能提升公司价值，并促使企业改善财务报告质量、独立董事离职，为新兴市场提供政策启示。
Abstract There is a long-standing debate about whether the costs associated with the potential misuse of securities class action (SCA) litigation outweigh its benefits in strengthening investor protection. We address this debate by examining the market reaction to the ruling in China’s first SCA-style Special Securities Representative Action (SSRA), filed against Kangmei Pharmaceutical. We find that investors react positively to the ruling, suggesting that the adoption of SCA litigation is perceived as value-enhancing. Extending ethical decision-making theory, we show that legal enforcement increases the perceived seriousness of consequences and thereby reshapes both organizational reporting behavior and individual director responses. Specifically, a difference-in-differences analysis reveals that firms with greater ex ante litigation risk improve their financial reporting quality and reduce the incidence of accounting violations and restatements following the ruling. We further show that independent directors are more likely to depart from firms with higher agency conflicts, indicating that individual responses to enforcement depend on the governance environment in which directors serve. Overall, our evidence highlights the effectiveness and value implications of adopting and enforcing SCA litigation in China and provides important conceptual and policy insights for emerging markets with civil law systems and relatively underdeveloped institutions.