Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995
Johnson, Marilyn F.; Kasznik, Ron; Nelson, Karen K.
2000-09
Citation
Johnson, Marilyn F.; Kasznik, Ron; Nelson, Karen K.; (2000). "Shareholder Wealth Effects of the Private Securities Litigation Reform Act of 1995." Review of Accounting Studies 5(3): 217-233. <http://hdl.handle.net/2027.42/47702>
Abstract
This paper investigates the reaction ofstock prices to enactment of the Private Securities LitigationReform Act of 1995 (PSLRA). Based on a sample of 489 high-technologyfirms, we find that the PSLRA was wealth-increasing, on average,and that the market reaction is more positive for firms at greatestrisk of being sued in a securities class action. However, wealso show that the PSLRA was less beneficial for firms likelyto be the subject of a meritorious lawsuit. Collectively, ourevidence implies that shareholders generally benefit from restrictionson private securities litigation, although these benefits aremitigated when other mechanisms for curbing fraudulent activityare inadequate.Publisher
Kluwer Academic Publishers; Springer Science+Business Media
ISSN
1380-6653 1573-7136
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