The Shareholder Wealth Implications of Corporate Lawsuits

Posted: 24 Feb 1997

See all articles by Sanjai Bhagat

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance

John M. Bizjak

Texas Christian University

Jeffrey L. Coles

University of Utah - Department of Finance; Arizona State University (ASU) - Finance Department

Date Written: September 1996

Abstract

This paper analyzes lawsuits in which at least one side, plaintiff or defendant, is a corporation. In particular, we provide evidence on the relative frequency of the legal issues involved, the incidence of suits by whether the opponent is another firm, governmental entity, or non- corporate private entity. Furthermore, we explore the direct and indirect costs and benefits to firms involved in different types of legal battles. Specifically, we examine the stock market reaction to filing and settlement announcements and find that characteristics of the suit, such as legal issue, type of opponent, and firm characteristics (i.e., firm size and proximity to bankruptcy) have power to explain cross-sectional variation in these wealth effects.

JEL Classification: G34, G18, G38, K22, K32, K41

Suggested Citation

Bhagat, Sanjai and Bizjak, John M. and Coles, Jeffrey L., The Shareholder Wealth Implications of Corporate Lawsuits (September 1996). Available at SSRN: https://ssrn.com/abstract=8129

Sanjai Bhagat (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)

John M. Bizjak

Texas Christian University ( email )

Fort Worth, TX 76129
United States
817-257-4260 (Phone)

Jeffrey L. Coles

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-587-9093 (Phone)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-4475 (Phone)
480-965-8539 (Fax)

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