IDEAS home Printed from https://ideas.repec.org/p/hku/briefs/202152.html
   My bibliography  Save this paper

How Companies Can Protect Against Securities Class Action Lawsuits Using Risk Factor Disclosure

Author

Listed:
  • Allen Huang

    (Assistant Professor, Department of Accounting , Hong Kong University of Science and Technology Technology.Author-Email: allen.huang@ust.hk)

Abstract

Securities class action lawsuits are arguably the most significant litigation risk for firms listed in the US, UK, Australia and Canada, with an average settlement of $3.4 billion USD in the US in the last decade. Despite managers' intention to provide information to investors by discussing forward-looking information, investors often sue companies for providing overly optimistic forecasts when the outcome is negative. Our research shows that managers perceive lower litigation risk in issuing forward-looking information when they disclose sufficiently detailed risk factor disclosures and invoke the safe harbor protection. Firms that consider listing in the United States should provide sufficient risk factor disclosure to avoid becoming targets in securities class action lawsuits.

Suggested Citation

  • Allen Huang, 2021. "How Companies Can Protect Against Securities Class Action Lawsuits Using Risk Factor Disclosure," HKUST IEMS Thought Leadership Brief Series 2021-52, HKUST Institute for Emerging Market Studies, revised Jan 2021.
    • Handle: RePEc:hku:briefs:202152
    as

    Download full text from publisher

    File URL: https://iems.ust.hk/assets/publications/thought-leadership-briefs/2021/hkustiems-tlb52-huang-protect-securities-class-action-risk-disclosure.pdf
    File Function: First version, 2021
    Download Restriction: no
    ---><---

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hku:briefs:202152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carla Chan (email available below). General contact details of provider: https://edirc.repec.org/data/ieusthk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.