Identifying ineffective monitors from securities class action lawsuits

Author

Chi Shen WEI, Singapore Management UniversityFollow
Lei ZHANG

Publication Type

Working Paper

Version

submittedVersion

Publication Date

10-2018

Abstract

We identify “ineffective” institutional monitors based on the prevalence of occurrences of securities class-action lawsuits in their overall portfolio. We find that firms with a higher representation of such institutional investors among the firms’ large shareholders have a greater likelihood of future litigation and experience more negative market reactions upon such litigation filings. These firms exhibit other unfavorable governance outcomes including poorer acquisitions and lower CEO turnover-performance sensitivity. We find suggestive evidence that ineffective monitoring may be a result of higher operational risk.

Keywords

Institutional investors, Securities class action litigation, Shareholder linkages, Corporate governance

Discipline

Corporate Finance | Portfolio and Security Analysis

Research Areas

Finance

First Page

1

Last Page

58

Citation

WEI, Chi Shen and ZHANG, Lei. Identifying ineffective monitors from securities class action lawsuits. (2018). 1-58.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6573

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.