Quantitative Proof of Reputational Harm

Abstract:     
Economists have advocated, and courts have accepted a decline in the stock price of a defamed corporation as an economic measure of its reputational harm. Although the economic rationale for this approach is sound and widely accepted, its legal foundations and consistency with the damages doctrines of defamation law have remained unexplored. This article presents an analysis of its legal basis. The analysis shows that the logic of common law precedent, supported by statutes and academic commentary, points to a measure of special damages for reputational harm based on stock market data.

Keywords: Corporate defamation, reputation, special damages, stock price impact

JEL Classifications: K1

Working Paper Series