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The Effect of Compensation System on the Dispute Resolution of Securities False Statement in China: A Law and Economics Analysis

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  • Wang Lin

    (Shanghai University of Finance and Economics, School of Law, Shanghai, China)

Abstract

This article examines the effects of compensation system in the dispute resolution of securities false statement. Firstly, this paper develops an evolutionary game model to analyze the evolutionary stable strategy (ESS) of the dispute resolution. Then, we analyze the factor which influence the choice of the parties from an economics perspective. Expected compensation and expected systemic risk are more influential to the decision of the parties by derivation. Moreover, we test the theoretical deduction with statistics description of the private securities litigation in China. In conclusion, the irrational expectation of the litigation income, which influences the strategy selection of the parties and results in more lawsuits.

Suggested Citation

  • Wang Lin, 2018. "The Effect of Compensation System on the Dispute Resolution of Securities False Statement in China: A Law and Economics Analysis," Asian Journal of Law and Economics, De Gruyter, vol. 9(3), pages 1-9, December.
    • Handle: RePEc:bpj:ajlecn:v:9:y:2018:i:3:p:9:n:2
    DOI: 10.1515/ajle-2018-0012
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    References listed on IDEAS

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    1. Calabresi, Guido & Schwartz, Kevin S., 2011. "The Costs of Class Actions: Allocation and Collective Redress in the U.S. Experience," IEL Working Papers 1, Institute of Public Policy and Public Choice - POLIS.
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    4. Marta Cenini & Barbara Luppi & Francesco Parisi, 2011. "Incentive effects of class actions and punitive damages under alternative procedural regimes," European Journal of Law and Economics, Springer, vol. 32(2), pages 229-240, October.
    5. Karl Wärneryd, 2012. "Nine points of the law: evidentiary rules and the costs of litigation," Public Choice, Springer, vol. 153(3), pages 279-285, December.
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