Internal and External Discipline Following Securities Class Actions
AbstractCompanies are sometimes accused of misleading the market. The SEC can punish this with enforcement actions. Alternatively, shareholders can seek redress through a shareholder class action (SCA). While some literature has examined SEC actions, it has not examined SCAs, and has not examined external discipline and the managers's future employment prospects after either action. Thus, using a sample of 416 securities class actions, this paper shows that SCAs are a catalyst to promote disciplinary takeovers, CEO/CFO turnover and CEO/CFO pay-cuts, and harm CEOs future job-prospects. This suggests that even if the law governing SCAs is sub-optimal, they can still induce internal and external discipline.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-044.
Date of creation: 2011
Date of revision:
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Web page: http://center.uvt.nl
Securities Class Actions; Securities Law; Governance; Ethics; Takeovers; Managerial Turnover; Fraud; Disclosure;
Other versions of this item:
- Humphery-Jenner, Mark L., 2012. "Internal and external discipline following securities class actions," Journal of Financial Intermediation, Elsevier, vol. 21(1), pages 151-179.
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
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