Quantifying Shareholder Losses from Continuous Disclosure Breaches: An Assessment of US Court Methods

Journal of Applied Research in Accounting and Finance (JARAF), Vol. 8, No. 2, 2013

27 Pages Posted: 9 Jan 2014  

Elvis Jarnecic

The University of Sydney; Financial Research Network (FIRN)

Daniel Brian Maroney

The University of Sydney - Discipline of Finance

Date Written: 2013

Abstract

In US securities fraud cases, the Market Model-based event study has been a required component of any calculation of damages. However, in Australia, there is no authority regarding the appropriate method for estimating damages for breaches of continuous disclosure provisions, a branch of securities fraud, by publicly-listed companies. This paper assesses four major methods for determining damages applied in US securities fraud matters to actual Australian breaches of continuous disclosure. Given the widespread acceptance and strength of the theoretical underpinnings of the Market Model, any divergence in damages estimation by the other methods supports the deference that should be shown to the Market Model in quantifying damages in securities fraud matters. The results highlight that the Market Model estimates loss differently from the other methods to a highly significant degree, thereby supporting the appropriateness of the Market Model in both US and Australian securities fraud matters.

Keywords: Accounting, Finance

JEL Classification: M40, M41

Suggested Citation

Jarnecic, Elvis and Maroney, Daniel Brian, Quantifying Shareholder Losses from Continuous Disclosure Breaches: An Assessment of US Court Methods (2013). Journal of Applied Research in Accounting and Finance (JARAF), Vol. 8, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=2376034

Elvis Jarnecic (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Daniel Brian Maroney

The University of Sydney - Discipline of Finance ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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