IDEAS home Printed from https://ideas.repec.org/a/oup/amlawe/v19y2017i2p287-326..html

The Shareholder Wealth Effects of Delaware Litigation

Author

Listed:
  • Adam B. Badawi
  • Daniel L. Chen

Abstract

We collect data on the record of every action in hundreds of derivative cases and merger class actions involving public companies filed in the Delaware Court of Chancery from 2004 to 2011. We use these data to analyze how markets respond to litigation in the most important court for corporate disputes in the United States. The detail in the dataset allows us to explore how case characteristics such as the timing of the filing, the presence of certain procedural motions, litigation intensity, and the judge assigned to the case relate to firm value. Unlike previous studies, we document that negative abnormal returns are associated with the filing of derivative cases, and we show that this association is particularly strong for cases that are first filed in Delaware and are not related to a previously disclosed government investigation. We also develop some evidence that market participants can anticipate litigation intensity and respond by valuing the firm equity less and that markets associate cases with pension fund plaintiffs with better outcomes than cases without this institutional involvement. Finally, we find little evidence of abnormal returns associated with judicial assignment at the time of filing for derivative cases, but we do observe an association between judicial assignment and case filing for merger cases.

Suggested Citation

  • Adam B. Badawi & Daniel L. Chen, 2017. "The Shareholder Wealth Effects of Delaware Litigation," American Law and Economics Review, American Law and Economics Association, vol. 19(2), pages 287-326.
    • Handle: RePEc:oup:amlawe:v:19:y:2017:i:2:p:287-326.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/aler/ahx015
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang Xu & Vincent Jia & Xinze Qian & Haizhi Wang & Xiaotian Zhang, 2024. "Delaware Reincorporation and the Double-Exit Puzzle: Evidence from Post-Initial Public Offering Acquisitions," IJFS, MDPI, vol. 12(2), pages 1-15, April.
    2. Yongqiang Chu & Yijia (Eddie) Zhao, 2021. "The dark side of shareholder litigation: Evidence from corporate takeovers," Financial Management, Financial Management Association International, vol. 50(3), pages 845-873, September.
    3. Yiwei Li & Wei Song & Tingyu Sun & Qingjing Zhang, 2023. "The impact of shareholder litigation risk on income smoothing," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1379-1413, November.

    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:oup:amlawe:v:19:y:2017:i:2:p:287-326.. 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/aler .

    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.