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The effect of securities class action lawsuits on mergers and acquisitions

Author

Listed:
  • Basnet, Anup
  • Davis, Frederick
  • Walker, Thomas
  • Zhao, Kun

Abstract

This paper investigates whether shareholder class action litigation affects the takeover candidacy, premium, and completion rate of mergers and acquisitions involving defendant target firms. We use a comprehensive dataset of publicly traded U.S. firms that became the targets of takeover bids between 1998 and 2016 and find that firms subject to shareholder class action lawsuits within the previous two years are more likely to be targeted for acquisition while commanding a significantly higher premium. Firms that face such litigation after a takeover announcement experience a significant decrease in takeover completion.

Suggested Citation

  • Basnet, Anup & Davis, Frederick & Walker, Thomas & Zhao, Kun, 2021. "The effect of securities class action lawsuits on mergers and acquisitions," Global Finance Journal, Elsevier, vol. 48(C).
  • Handle: RePEc:eee:glofin:v:48:y:2021:i:c:s1044028319301978
    DOI: 10.1016/j.gfj.2020.100556
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    More about this item

    Keywords

    Securities class action litigation; Mergers and acquisitions; Takeovers; Takeover likelihood;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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