The Effect of Securities Class Action Lawsuits on Mergers and Acquisitions

Posted: 27 Oct 2020 Last revised: 22 Jan 2022

See all articles by Anup Basnet

Anup Basnet

University of Surrey

Frederick James Davis

Concordia University

Thomas John Walker

Concordia University, Quebec - Department of Finance

Kun Zhao

affiliation not provided to SSRN

Date Written: July 5, 2020

Abstract

This paper investigates whether shareholder class action litigation affects the takeover candidacy, premium, and completion rate of mergers and acquisitions involving defendant target firms. We use a comprehensive data set of publicly traded U.S. firms that became the targets of takeover bids between 1998 and 2016 and find that firms subject to shareholder class action lawsuits within the previous two years are more likely to be targeted for acquisition while commanding a significantly higher premium. Firms that face such litigation after a takeover announcement experience a significant decrease in takeover completion.

Keywords: Securities Class Action Litigation, Mergers and Acquisitions, Takeovers, Takeover Likelihood

JEL Classification: G34, K22

Suggested Citation

Basnet, Anup and Davis, Frederick James and Walker, Thomas John and Zhao, Kun, The Effect of Securities Class Action Lawsuits on Mergers and Acquisitions (July 5, 2020). Global Finance Journal, Vol 48, 2021 , Available at SSRN: https://ssrn.com/abstract=3719506

Anup Basnet (Contact Author)

University of Surrey ( email )

Alexander Fleming Rd
Guildford, GU2 7XH
United Kingdom

HOME PAGE: http://https://www.surrey.ac.uk/people/anup-basnet

Frederick James Davis

Concordia University ( email )

Montreal, Quebec
Canada

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Kun Zhao

affiliation not provided to SSRN

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