Internal and External Discipline Following Securities Class Actions

M. Humphery-Jenner

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Abstract

Companies are sometimes accused of misleading the market. The SEC can punish this with enforcement actions. Alternatively, shareholders can seek redress through a shareholder class action (SCA). While some literature has examined SEC actions, it has not examined SCAs, and has not examined external discipline and the managers's future employment prospects after either action. Thus, using a sample of 416 securities class actions, this paper shows that SCAs are a catalyst to promote disciplinary takeovers, CEO/CFO turnover and CEO/CFO pay-cuts, and harm CEOs future job-prospects. This suggests that even if the law governing SCAs is sub-optimal, they can still induce internal and external discipline.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Volume2011-044
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-044

Keywords

  • Securities Class Actions
  • Securities Law
  • Governance
  • Ethics
  • Takeovers
  • Managerial Turnover
  • Fraud
  • Disclosure

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    Humphery-Jenner, M. (2011). Internal and External Discipline Following Securities Class Actions. (CentER Discussion Paper; Vol. 2011-044). Economics.