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Institutional Activism Through Litigation: An Empirical Analysis of Public Pension Fund Participation in Securities Class Actions

Journal of Empirical Legal Studies, Forthcoming

St. John's Legal Studies Research Paper No. 06-0055

39 Pages Posted: 19 Oct 2006 Last revised: 8 Sep 2011

Michael A. Perino

St. John's University School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: August 3, 2011

Abstract

The PSLRA’s lead plaintiff provision enlisted institutional investors to monitor class counsel in order to curb the agency costs endemic in securities class actions. This paper uses a sample of 731 settlements to examine the efficacy of this provision. It finds that, even when controlling for institutional self-selection of potentially easier or higher quality cases, cases with public pension lead plaintiffs have larger recoveries and lower fee requests and fee awards than cases with other lead plaintiff types. The paper also finds evidence consistent with the existence of a significant positive externality associated with public pension participation. Over time, fee requests and fee awards have on average declined significantly even in cases without such lead plaintiffs. These findings suggest that public pensions act as more effective monitors of class counsel than traditional plaintiffs and that the lead plaintiff provision has substantially reduced the transactions costs associated with securities class actions.

Keywords: Class actions, PSLRA, lead plaintiff, institutional investors

JEL Classification: K22, K41

Suggested Citation

Perino, Michael A., Institutional Activism Through Litigation: An Empirical Analysis of Public Pension Fund Participation in Securities Class Actions (August 3, 2011). Journal of Empirical Legal Studies, Forthcoming; St. John's Legal Studies Research Paper No. 06-0055. Available at SSRN: https://ssrn.com/abstract=938722

Michael Perino (Contact Author)

St. John's University School of Law ( email )

8000 Utopia Parkway
Jamaica, NY 11439
United States
718-990-1928 (Phone)
718-591-1855 (Fax)

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