IDEAS home Printed from https://ideas.repec.org/a/bpj/rlecon/v6y2010i2n1.html
   My bibliography  Save this article

Surprise! Most Blockbuster Jury Awards Are Ignored By The Stock Market

Author

Listed:
  • Palmer Michael

    (University of Colorado)

  • Sanders Thomas B.

    (University of Miami)

Abstract

Utilizing a master list produced by Viscusi (2004) of what he called "blockbuster" jury awards-those amounting to $100 million or more,-we selected 17 cases where the defendant had traded shares (we excluded the tobacco cases) to see the stock market reaction to these announced awards. Utilizing event study methodologies similar to those used by Prince and Rubin (2002), and looking at both case filing and award date data, we generally found trivial stock market effects for 11 of the 17 companies, despite the size of the awards. In those cases where there was a stock market response, it occurred with firms whose total award to market capitalization ratio was in excess of 9%. Apparently the awards, which on their face value seem large, are not always that important when one considers the much larger market capitalization and the fact that these very large, prominent defendant firms are under almost constant litigation, with the blockbuster being only one of many cases facing the firm.

Suggested Citation

  • Palmer Michael & Sanders Thomas B., 2010. "Surprise! Most Blockbuster Jury Awards Are Ignored By The Stock Market," Review of Law & Economics, De Gruyter, vol. 6(2), pages 145-166, July.
    • Handle: RePEc:bpj:rlecon:v:6:y:2010:i:2:n:1
    DOI: 10.2202/1555-5879.1425
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1555-5879.1425
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1555-5879.1425?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Herbst, Anthony F. & Marshall, John F. & Wingender, John, 1996. "An analysis of the stock market's response to the Exxon Valdez disaster," Global Finance Journal, Elsevier, vol. 7(1), pages 101-114.
    2. Govindaraj Suresh & Lee Picheng & Tinkelman Daniel, 2007. "Using the Event Study Methodology to Measure the Social Costs of Litigation - A Re-Examination Using Cases from the Automobile Industry," Review of Law & Economics, De Gruyter, vol. 3(2), pages 341-382, November.
    3. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-536, June.
    4. Hertzel, Michael G & Smith, Janet Kiholm, 1993. "Industry Effects of Interfirm Lawsuits: Evidence from Pennzoil v. Texaco," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 9(2), pages 425-444, October.
    5. Frederick Warren-Boulton & Serdar Dalkir, 2001. "Staples and Office Depot: An Event-Probability Case Study," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(4), pages 467-479, December.
    6. David W. Prince & Paul H. Rubin, 2002. "The Effects of Product Liability Litigation on the Value of Firms," American Law and Economics Review, American Law and Economics Association, vol. 4(1), pages 44-87, January.
    7. Viscusi, W Kip & Hersch, Joni, 1990. "The Market Response to Product Safety Litigation," Journal of Regulatory Economics, Springer, vol. 2(3), pages 215-230, September.
    8. Steven Garber & John Adams, 1998. "Product and Stock Market Responses to Automotive Prodct Liability Verdicts," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998 Micr), pages 1-53.
    9. Barber, Brad M & Darrough, Masako N, 1996. "Product Reliability and Firm Value: The Experience of American and Japanese Automakers, 1973-1992," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1084-1099, October.
    10. Karafiath, Imre, 1988. "Using Dummy Variables in the Event Methodology," The Financial Review, Eastern Finance Association, vol. 23(3), pages 351-357, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Seth Freedman & Melissa Kearney & Mara Lederman, 2012. "Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 499-516, May.
    2. Maria De Paola & Vincenzo Scoppa, 2013. "Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(3), pages 235-280, May.
    3. Sumiko Takaoka, 2006. "Product Defects and the Value of the Firm in Japan: The Impact of the Product Liability Law," The Journal of Legal Studies, University of Chicago Press, vol. 35(1), pages 61-84, January.
    4. Baniak Andrzej & Grajzl Peter, 2013. "Equilibrium and Welfare in a Model of Torts with Industry Reputation Effects," Review of Law & Economics, De Gruyter, vol. 9(2), pages 265-302, October.
    5. Na-Eun Cho & Yue Maggie Zhou, 2021. "Profits, Reputation, and the Risk of Medical Malpractice Liability," Strategy Science, INFORMS, vol. 6(3), pages 228-243, September.
    6. Takaoka, Sumiko, 2004. "Verdicts and the value of the firm in Japan," Economics Letters, Elsevier, vol. 84(1), pages 93-97, July.
    7. Lian Fen Lee & Amy P. Hutton & Susan Shu, 2015. "The Role of Social Media in the Capital Market: Evidence from Consumer Product Recalls," Journal of Accounting Research, Wiley Blackwell, vol. 53(2), pages 367-404, May.
    8. David Dranove & Subramaniam Ramanarayanan & Yasutora Watanabe, 2012. "Delivering Bad News: Market Responses to Negligence," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 1-25.
    9. Gokhale, Jayendra & Brooks, Raymond M. & Tremblay, Victor J., 2014. "The effect on stockholder wealth of product recalls and government action: The case of Toyota's accelerator pedal recall," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 521-528.
    10. Omesh Kini & Mo Shen & Jaideep Shenoy & Venkat Subramaniam, 2022. "Labor Unions and Product Quality Failures," Management Science, INFORMS, vol. 68(7), pages 5403-5440, July.
    11. Juan Luis Nicolau, 2001. "Parametric And Nonparametric Approaches To Event Studies: An Application To A Hotel'S Market Value," Working Papers. Serie AD 2001-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    12. Wen Wen & Chris Forman & Stuart J. H. Graham, 2013. "Research Note ---The Impact of Intellectual Property Rights Enforcement on Open Source Software Project Success," Information Systems Research, INFORMS, vol. 24(4), pages 1131-1146, December.
    13. Bruce Mizrach & Susan Zhang Weerts, 2006. "Does The Stock Market Punish Corporate Malfeasance? A Case Study of Citigroup," Departmental Working Papers 200601, Rutgers University, Department of Economics.
    14. Chebolu-Subramanian, Vijaya & Gaukler, Gary M., 2015. "Product contamination in a multi-stage food supply chain," European Journal of Operational Research, Elsevier, vol. 244(1), pages 164-175.
    15. Omer N. Gokalp & Sami Keskek & Abdullah Kumas & Marshall A. Geiger, 2020. "Insider trading around auto recalls: Does investor attention matter?," Review of Quantitative Finance and Accounting, Springer, vol. 55(3), pages 1003-1033, October.
    16. Azoulay, Pierre & Bonatti, Alessandro & Krieger, Joshua L., 2017. "The career effects of scandal: Evidence from scientific retractions," Research Policy, Elsevier, vol. 46(9), pages 1552-1569.
    17. Malik, Mahfuja & Jebari, Fatima, 2023. "Product recall and CEO compensation: Evidence from the automobile industry," Finance Research Letters, Elsevier, vol. 54(C).
    18. Huang, Jiekun, 2018. "The customer knows best: The investment value of consumer opinions," Journal of Financial Economics, Elsevier, vol. 128(1), pages 164-182.
    19. Paul Lanoie & Benoit Laplante & Maité Roy, 1997. "Can Capital Markets Create Incentives for Pollution Control?," CIRANO Working Papers 97s-05, CIRANO.
    20. Unsal, Omer & Hassan, M. Kabir & Zirek, Duygu, 2017. "Product recalls and security prices: New evidence from the US market," Journal of Economics and Business, Elsevier, vol. 93(C), pages 62-79.

    More about this item

    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:bpj:rlecon:v:6:y:2010:i:2:n:1. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    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.