The Effects of Product Liability Litigation on the Value of Firms
Simpson, Thacher and Bartlett
Paul H. Rubin
Emory University - Department of Economics
April 15, 2000
We use event study methodology to examine the effects of product liability litigation on firms in the automobile and pharmaceutical industries. Others have examined verdicts and found no effect. We find that the filing of lawsuits leads to significant losses in firm value. These losses are approximately equal to the upper bound of the direct loss in value of the firms involved; there appears to be relatively little loss in reputation from product liability events. We find that in the automobile industry, competitors lose when one firm is sued, but in the pharmaceutical industry, a lawsuit against one firm leads to an increase in value of other firms.
Number of Pages in PDF File: 45
JEL Classification: G14, K13, L14
Date posted: April 26, 2000
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