Shareholder Litigation and Changes in Disclosure Behavior
58 Pages Posted: 15 Sep 2006 Last revised: 14 Sep 2011
Date Written: April 1, 2008
We examine changes in the disclosure behavior of firms involved in 827 disclosure-related class-action securities litigation cases filed between 1996 and 2005. We find no evidence that the firms in our sample respond to the litigation event by increasing or improving their disclosures to investors. Rather, we find consistent evidence that firms reduce the level of information provided post-litigation. Our results suggest that the litigation process encourages firms to decrease the provision of disclosures for which they may later be held accountable, despite the increased protections afforded by the Private Securities Litigation Reform Act of 1995.
Keywords: Disclosure, Litigation, Management Forecasts, Earnings Surprises, Litigation Risk, Conference Calls, Forecast Properties
JEL Classification: M41, M45, G14, K22
Suggested Citation: Suggested Citation