Spillover Effects in Securities Litigation

摘要: This study examines the spillover effect of securities litigation. Peers sued firm have negative three-day abnormal returns around case filings and continue underperforming over sixty trading days. also improve financial reporting quality change qualitative disclosure characteristics by providing more readable positive annual reports while reducing use litigation-related terms. Finally, peers increase voluntary earnings guidance but reduce timeliness precision. Results are primarily driven meritorious cases (i.e., those that eventually settle), nonmeritorious little spillover. These peer changes appear largely successful as they lower future litigation incidence.