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Full-Text Articles in Securities Law
Event-Driven Suits And The Rethinking Of Securities Litigation, Merritt B. Fox, Joshua Mitts
Event-Driven Suits And The Rethinking Of Securities Litigation, Merritt B. Fox, Joshua Mitts
Faculty Scholarship
Event-driven securities suits-ones that arise after an issuer has experienced some kind of disaster-have become increasingly prevalent in recent years. These suits are based on the fraud-on-the-market doctrine, a doctrine that ultimately gives rise to the bulk of the damages paid out in settlements and judgments pursuant to private litigation under the U.S. securities laws. The theory behind fraud-on-the-market cases is that when an issuer's share price has been inflated by a Rule-10b-5-violating misstatement, investors who purchased shares at the inflated price have suffered a compensable injury if they still hold the shares after the inflation is gone. Although these …
Idiosyncratic Risk During Economic Downturns: Implications For The Use Of Event Studies In Securities Litigation, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson
Idiosyncratic Risk During Economic Downturns: Implications For The Use Of Event Studies In Securities Litigation, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson
Faculty Scholarship
We reported in a recent paper that during the 2008-09 financial crisis, for the average firm, idiosyncratic risk, as measured by variance, increased by five-fold. This finding is important for securities litigation because idiosyncratic risk plays a central role in event study methodology. Event studies are commonly used in securities litigation to determine materiality and loss causation. Many bits of news affect an issuer’s share price at the time of a corporate disclosure that is the subject of litigation. Because of this, even if an issuer’s market–adjusted price changes at the time of the disclosure, one cannot determine with certainty …