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Reputational Damages in Securities Litigation

21 Pages Posted: 10 Aug 2009 Last revised: 12 Feb 2010

Barbara Black

University of Cincinnati - College of Law

Date Written: August 15, 2009


This short paper, originating in remarks made at the Institute for Law and Economic Policy's 15th Annual Conference on Compensation of Plaintiffs in Mass Securities Litigation, addresses an issue that has surfaced post-Dura Pharmaceuticals: can investors recover damages resulting from declines in stock price attributable to the market's reassessment of the integrity of management or the corporation's internal controls? Some finance scholars label these damages as non-recoverable 'collateral damage' that are not attributable to the original fraudulent disclosure. I argue that this position is based on a mischaracterization of the original fraudulent disclosure and that there is no basis in law or policy for denying plaintiffs recovery for what are properly considered as reputational damages.

Keywords: damages, loss causation, securities fraud, securities class action

JEL Classification: K22, K29

Suggested Citation

Black, Barbara, Reputational Damages in Securities Litigation (August 15, 2009). Journal of Corporation Law, Vol. 35, p. 169, 2009; U of Cincinnati Public Law Research Paper No. 10-03. Available at SSRN:

Barbara Black (Contact Author)

University of Cincinnati - College of Law ( email )

P.O. Box 210040
Cincinnati, OH 45221-0040
United States

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