Does the stock market anticipate events and supreme court decisions in corporate cases?

Posted: 27 Jan 2021 Last revised: 16 Feb 2024

See all articles by Yehuda Davis

Yehuda Davis

Yeshiva University - Sy Syms School of Business

Suresh Govindaraj

Rutgers University - Rutgers Business School - Newark and New Brunswick

Kate Suslava

Bucknell University Freeman College of Management

Date Written: January 16, 2024

Abstract

This paper investigates stock market reactions to judicial events in the United States Supreme Court (SCOTUS) involving at least one public firm. Using a comprehensive dataset of >500 SCOTUS cases from 1948 to 2018, we find that the stock market reacts significantly to both the grant of certiorari and the announcement of the final decision. In particular, the stock market reaction to the petitioner and respondent being granted certiorari is significantly negative, portending general higher uncertainty ahead. Furthermore, the stock market reaction to the final decisions for winning (losing) firms is positive (negative). In addition, we find that case characteristics, such as parties involved and the type of legal issue, explain some of the cross-sectional variations in the stock returns across cases. Our tests also show that there is no prior information leakage and no stock price drift following the events.

Keywords: Abnormal stock returns; Supreme court; Petitioner; Respondent; Writ of certiorari

JEL Classification: K22; K40; D53

Suggested Citation

Davis, Yehuda and Govindaraj, Suresh and Suslava, Kate, Does the stock market anticipate events and supreme court decisions in corporate cases? (January 16, 2024). Global Finance Journal, Vol. 60, 2024, Available at SSRN: https://ssrn.com/abstract=3761235 or http://dx.doi.org/10.2139/ssrn.3761235

Yehuda Davis (Contact Author)

Yeshiva University - Sy Syms School of Business ( email )

United States

Suresh Govindaraj

Rutgers University - Rutgers Business School - Newark and New Brunswick ( email )

1 Washington Park
Room #934
Newark, NJ 07102
United States

Kate Suslava

Bucknell University Freeman College of Management ( email )

701 Moore Ave
Lewisburg, PA 18837
United States

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