Abstract

http://ssrn.com/abstract=2109739
 


 



SEC Investigations and Securities Class Actions: An Empirical Comparison


Stephen J. Choi


New York University School of Law

Adam C. Pritchard


University of Michigan Law School

February 25, 2014

U of Michigan Law & Econ Research Paper No. 12-022
NYU Law and Economics Research Paper No. 12-38

Abstract:     
We compare investigations by the SEC with securities fraud class action filings involving public companies. Using actions with both an SEC investigation and a class action as our baseline, we compare SEC-only investigations with class action-only lawsuits. We find that the stock market reacts more negatively to the class actions relative to SEC investigations. Looking at measures of information asymmetry, we find that investors in the market perceive greater information asymmetry following the public announcement of the underlying violation for class-action only lawsuits compared with SEC-only investigations. Turning to sanctions, we find that the incidence and magnitude of settlements, as well as the incidence of top officer resignation, are greater for class action-only lawsuits relative to SEC-only investigations. Our findings are consistent with the private enforcement providing at least as much deterrent value (if not more) compared with public enforcement and call into question whether SEC enforcement is superior to private enforcement.

Number of Pages in PDF File: 54

Keywords: SEC Enforcement, securities class actions

JEL Classification: K22, K42

working papers series


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Date posted: July 16, 2012 ; Last revised: February 28, 2014

Suggested Citation

Choi, Stephen J. and Pritchard, Adam C., SEC Investigations and Securities Class Actions: An Empirical Comparison (February 25, 2014). U of Michigan Law & Econ Research Paper No. 12-022; NYU Law and Economics Research Paper No. 12-38. Available at SSRN: http://ssrn.com/abstract=2109739 or http://dx.doi.org/10.2139/ssrn.2109739

Contact Information

Stephen J. Choi
New York University School of Law ( email )
40 Washington Square South
New York, NY 10012-1099
United States
Adam C. Pritchard (Contact Author)
University of Michigan Law School ( email )
625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

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