The Effects of Product Liability Litigation on the Value of Firms

45 Pages Posted: 26 Apr 2000  

David Prince

Simpson, Thacher and Bartlett

Paul H. Rubin

Emory University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2000

Abstract

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.

JEL Classification: G14, K13, L14

Suggested Citation

Prince, David and Rubin, Paul H., The Effects of Product Liability Litigation on the Value of Firms (April 15, 2000). Available at SSRN: https://ssrn.com/abstract=223433 or http://dx.doi.org/10.2139/ssrn.223433

David Prince

Simpson, Thacher and Bartlett ( email )

75 Front Street
Brooklyn, NY 11201
United States

Paul H. Rubin (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States
404-931-0493 (Phone)
630-604-9609 (Fax)

HOME PAGE: http://www.economics.emory.edu/Rubi.htm

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