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Punitive Damages in Securities Arbitration: An Empirical Study

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  • Stephen J. Choi
  • Theodore Eisenberg

Abstract

This article provides the first empirical analysis of punitive damages in securities arbitrations. Using a data set of over 6,800 securities arbitration awards, we find that claimants prevailed in 48.9 percent of arbitrations and that 9.1 percent of those claimant victories included a punitive damages award. The existence of a punitive damages award was associated with claims that suggested egregious misbehavior and with claims that provided higher compensatory awards. The pattern of punitive awards is more consistent with a traditional view of punitive damages that incorporates a retributive component than with a law and economics emphasis on efficient deterrence. We also report evidence that the relation between punitive and compensatory awards did not differ substantially between the securities arbitrators' data and data on juries available from periodic Civil Justice Surveys by the Bureau of Justice Statistics.

Suggested Citation

  • Stephen J. Choi & Theodore Eisenberg, 2010. "Punitive Damages in Securities Arbitration: An Empirical Study," The Journal of Legal Studies, University of Chicago Press, vol. 39(2), pages 497-546.
    • Handle: RePEc:ucp:jlstud:doi:10.1086/649601
    DOI: 10.1086/649601
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    1. Theodore Eisenberg & Michael Heise & Martin T. Wells, 2010. "Variability in Punitive Damages: Empirically Assessing Exxon Shipping Co. v. Baker," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(1), pages 5-26, March.
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    12. Karpoff, Jonathan M & Lott, John R, Jr, 1999. "On the Determinants and Importance of Punitive Damage Awards," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 527-573, April.
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    14. Thomas A. Eaton & David B. Mustard & Susette M. Talarico, 2005. "The Effects of Seeking Punitive Damages on the Processing of Tort Claims," The Journal of Legal Studies, University of Chicago Press, vol. 34(2), pages 343-369, June.
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    2. Theodore Eisenberg & Christoph Engel, 2012. "Assuring Adequate Deterrence in Tort: A Public Good Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_07, Max Planck Institute for Research on Collective Goods.
    3. Theodore Eisenberg & Christoph Engel, 2014. "Assuring Civil Damages Adequately Deter: A Public Good Experiment," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 11(2), pages 301-349, June.

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