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Insider Trading, Equity Issues and CEO Turnover in Firms Subject to Securities Class Actions

Author

Listed:
  • Greg Niehaus
  • Greg Roth

Abstract

This study finds that the managers of firms that have been the target of class action lawsuits alleging securities fraud did not, on average, have an unusual incentive to conceal negative information. Nevertheless, CEO turnover is higher in those cases where the suites have merit, indicating that securities class action lawsuits do have a disciplining effect.

Suggested Citation

  • Greg Niehaus & Greg Roth, 1999. "Insider Trading, Equity Issues and CEO Turnover in Firms Subject to Securities Class Actions," Financial Management, Financial Management Association, vol. 28(4), Winter.
  • Handle: RePEc:fma:fmanag:niehaus99
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    References listed on IDEAS

    as
    1. Michael S. Rozeff, 1998. "Stock Splits: Evidence from Mutual Funds," Journal of Finance, American Finance Association, vol. 53(1), pages 335-349, February.
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    Citations

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    Cited by:

    1. Bird, Robert C. & Borochin, Paul A. & Knopf, John D., 2015. "The role of the chief legal officer in corporate governance," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 1-22.
    2. Dalla Pellegrina Lucia & Saraceno Margherita, 2011. "Securities Class Actions: A Helping Hand for Bank Regulators in Trouble?," Review of Law & Economics, De Gruyter, vol. 7(1), pages 214-242, July.
    3. Dai, Lili & Fu, Renhui & Kang, Jun-Koo & Lee, Inmoo, 2016. "Corporate governance and the profitability of insider trading," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 235-253.
    4. Autore, Don M. & Hutton, Irena & Peterson, David R. & Smith, Aimee Hoffmann, 2014. "The effect of securities litigation on external financing," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 231-250.
    5. repec:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9373-7 is not listed on IDEAS
    6. Crutchley, Claire E. & Minnick, Kristina & Schorno, Patrick J., 2015. "When governance fails: Naming directors in class action lawsuits," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 81-96.
    7. Billings, Mary Brooke & Cedergren, Matthew C., 2015. "Strategic silence, insider selling and litigation risk," Journal of Accounting and Economics, Elsevier, vol. 59(2), pages 119-142.
    8. Blau, Benjamin M. & Tew, Philip L., 2014. "Short sales and class-action lawsuits," Journal of Financial Markets, Elsevier, vol. 20(C), pages 79-100.
    9. repec:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9382-6 is not listed on IDEAS
    10. Aharony, Joseph & Liu, Chelsea & Yawson, Alfred, 2015. "Corporate litigation and executive turnover," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 268-292.
    11. James Malm & Marcin Krolikowski, 2017. "Litigation risk and financial leverage," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(1), pages 180-194, January.
    12. repec:eee:corfin:v:45:y:2017:i:c:p:318-332 is not listed on IDEAS
    13. repec:wsi:qjfxxx:v:07:y:2017:i:01:n:s2010139216500142 is not listed on IDEAS
    14. Bradley, Daniel & Cline, Brandon N. & Lian, Qin, 2014. "Class action lawsuits and executive stock option exercise," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 157-172.
    15. Park, Jinwoo & Lee, Posang & Park, Yun W., 2014. "Information effect of involuntary delisting and informed trading," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 251-269.
    16. Ching, Ken M.L. & Firth, Michael & Rui, Oliver M., 2006. "The information content of insider trading around seasoned equity offerings," Pacific-Basin Finance Journal, Elsevier, vol. 14(1), pages 91-117, January.
    17. Del Brio, Esther B. & Miguel, Alberto & Perote, Javier, 2002. "An investigation of insider trading profits in the Spanish stock market," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(1), pages 73-94.
    18. Rogers, Jonathan L. & Van Buskirk, Andrew, 2009. "Shareholder litigation and changes in disclosure behavior," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 136-156, March.
    19. Baum, Christopher F. & Bohn, James G. & Chakraborty, Atreya, 2016. "Securities fraud and corporate board turnover: New evidence from lawsuit outcomes," International Review of Law and Economics, Elsevier, vol. 48(C), pages 14-25.

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