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Equity value implications of the SEC Exchange Act Rule 13a-14: a litigation cost perspective

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  • Mukesh Garg
  • Vic Naiker
  • Farshid Navissi

Abstract

The purpose of our study is to assess the role of litigation risk in the stock price setting process in relation to the Securities and Exchange Commission (SEC) Exchange Act Rule 13a-14. We employ 12 June, the proposal of Rule 13a-14, and 27 June, the ruling of certification requirement, as event dates, and investigate litigation cost implications of the SEC proposal and ruling. We focus on firms in industries that are highly exposed to class action lawsuits and find negative abnormal returns surrounding 12 June, and positive abnormal returns surrounding 27 June, for firms relieved from compliance requirements. The results are more profound for firms in high-litigation-risk industries.

Suggested Citation

  • Mukesh Garg & Vic Naiker & Farshid Navissi, 2012. "Equity value implications of the SEC Exchange Act Rule 13a-14: a litigation cost perspective," Australian Journal of Management, Australian School of Business, vol. 37(1), pages 77-98, April.
    • Handle: RePEc:sae:ausman:v:37:y:2012:i:1:p:77-98
    DOI: 10.1177/0312896211430846
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    References listed on IDEAS

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    2. Larelle Chapple & Victoria J Clout & David Tan, 2014. "Corporate governance and securities class actions," Australian Journal of Management, Australian School of Business, vol. 39(4), pages 525-547, November.

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