Securities Class Actions, Corporate Governance and Managerial Agency Problems

43 Pages Posted: 31 Jul 1998

See all articles by Philip E. Strahan

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: June 1998


This paper provides support for the proposition that securities class actions help solve agency problems. Two key findings support this conclusion. First, firms that are more likely to suffer from agency problems are more likely to face class actions. Risky firms, large firms, young firms, low market-to-book firms and non-dividend paying firms as of the end of 1990 were more likely to face a class action filing during the January 1991 to March 1998 period. Second, the probability of CEO turnover increases dramatically after class action filings. The increase can not be explained by omitted firm-specific characteristics, financial distress, or the possibility that CEO turnover increases the likelihood that a lawyer will file a class action.

Suggested Citation

Strahan, Philip E., Securities Class Actions, Corporate Governance and Managerial Agency Problems (June 1998). Available at SSRN: or

Philip E. Strahan (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
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