Journal of Accounting and Economics Vol. 65 No. 1 2018
Information bundling and securities litigation
Abstract
We exploit the exogenous shock of a 2005 U.S. Supreme Court decision on securities class action loss causation requirements to examine two ways that firms bundle information with restatements: “positive bundling” of good news and “noise bundling” of additional bad news. We find that positive bundling offsets price declines and results in less litigation. In contrast, noise bundling magnifies price declines, but nevertheless deters litigation by confounding which bad news caused a decline. Non-bundled restatements are 5.94 times more likely to result in litigation. Bundled restatements have 8.17 times higher dismissal rates and 21.17 to 23.45 million lower settlement amounts.
- DOI
- 10.1016/j.jacceco.2017.11.013
- Volume
- 65
- Issue
- 1
- Pages
- 61-84
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref