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The Screening Effect Of The Private Securities Litigation Reform Act, Stephen Choi, Karen K. Nelson, Adam C. Pritchard
The Screening Effect Of The Private Securities Litigation Reform Act, Stephen Choi, Karen K. Nelson, Adam C. Pritchard
Law & Economics Working Papers Archive: 2003-2009
Prior research shows that the PSLRA increased the significance of merit-related factors, such as the presence of an accounting restatement or insider selling, in determining the incidence and outcomes of securities fraud class actions. (Johnson, Nelson, and Pritchard, 2007). This result, however, is consistent with two possible hypotheses. First, the PSLRA may have reduced solely the incidence of non-meritorious litigation. Second, the PSLRA may have changed the definition of merit, effectively precluding claims that would have survived and produced a settlement pre-PSLRA. This paper tests these alternative hypotheses. We find that pre-PSLRA claims that settled for nuisance value would be …