There are Plaintiffs and... There are Plaintiffs: An Empirical Analysis of Securities Class Action Settlements

33 Pages Posted: 7 Nov 2007 Last revised: 23 Dec 2014

James D. Cox

Duke University School of Law

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Lynn Bai

University of Cincinnati - College of Law

Abstract

In this paper, we examine the impact of the PSLRA and more particularly the impact the type of lead plaintiff on the size of settlements in securities fraud class actions. We thus provide insight into whether the type of plaintiff that heads the class action impacts the overall outcome of the case. Furthermore, we explore possible indicia that may explain why some suits settle for extremely small sums - small relative to the "provable losses" suffered by the class, small relative to the asset size of the defendant-company, and small relative to other settlements in our sample. This evidence bears heavily on the debate over "strike suits." Part I of this paper sets forth the contemporary debate surrounding the need for further reforms of securities class actions. In this section, we set forth the insights advanced in three prominent reports focused on the competitiveness of U.S. capital markets. In Part II we first provide descriptive statistics of our extensive data set, and then use multivariate regression analysis to explore the underlying relationships. In Part III, we closely examine small settlements for clues to whether they reflect evidence of strike suits. We conclude in Part IV with a set of policy recommendations based on our analysis of the data.

Keywords: plaintiffs, securities, empirical class actions

Suggested Citation

Cox, James D. and Thomas, Randall S. and Bai, Lynn, There are Plaintiffs and... There are Plaintiffs: An Empirical Analysis of Securities Class Action Settlements. Vanderbilt Law Review, Vol. 61, p. 355, 2008; Vanderbilt Law and Economics Research Paper No. 07-33; U of Cincinnati Public Law Research Paper No. 07-32. Available at SSRN: https://ssrn.com/abstract=1028287

James D. Cox

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7056 (Phone)
919-613-7231 (Fax)

Randall S. Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Lynn Bai

University of Cincinnati - College of Law ( email )

P.O. Box 210040
Cincinnati, OH 45221-0040
United States
513-556-0194 (Phone)

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