Shareholder Litigation: Deterrent Value, Merit and Litigants' Options

Posted: 28 Oct 1996

See all articles by Frederick C. Dunbar

Frederick C. Dunbar

U.S. Securities and Exchange Commission

Vinita M. Juneja

NERA Economic Consulting

Denise N. Martin

NERA Economic Consulting

Date Written: October 1995

Abstract

The paper contributes to the theoretical and empirical literature on shareholder litigation in four ways: (1) We review the literature on the deterrent effects of class actions, noting contradictions, and verify that the current system cannot result in optimal deterrence; (2) We demonstrate that the empirical research on the merits suffers from a lack of statistical rigor; (3) We develop a model that shows how low-value settlements may represent the efficient resolution of meritorious claims, rather than "nuisance suit" settlements. We further explain plaintiffs' attorneys' behavior in arriving at settlements by viewing the shareholder class action as an option; and (4) We test hypotheses and update portions of the empirical research using sophisticated statistical techniques.

JEL Classification: G38, K22

Suggested Citation

Dunbar, Frederick C. and Juneja, Vinita M. and Martin, Denise N., Shareholder Litigation: Deterrent Value, Merit and Litigants' Options (October 1995). Available at SSRN: https://ssrn.com/abstract=10181

Frederick C. Dunbar (Contact Author)

U.S. Securities and Exchange Commission ( email )

100 F Street, NE
Washington, DC 20549
United States
202-551-3615 (Phone)

Vinita M. Juneja

NERA Economic Consulting ( email )

50 Main Street, 14th Floor
White Plains, NY 10606
United States

Denise N. Martin

NERA Economic Consulting ( email )

50 Main Street, 14th Floor
White Plains, NY 10606
United States
212-345-5296 (Phone)
212-345-4650 (Fax)

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