45 Pages Posted: 26 Apr 2000
Date Written: April 15, 2000
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: 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