The Effects of Securities Class Action Litigation on Corporate Liquidity and Investment Policy

The risk of securities class action litigation alters corporate savings and investment policy. Firms with greater exposure to securities litigation hold significantly more cash in anticipation of future settlements and other related costs. The result is due to firms accumulating cash in anticipation of lawsuits and not a consequence of plaintiffs targeting firms with high cash levels. The market value of cash is significantly lower for firms exposed to litigation risk. Corporate investment decisions are also affected by litigation risk, as firms reduce capital expenditures in response. Our results are robust to endogeneity concerns and possible spurious temporal effects

When Managers Bypass Shareholder Approval of Board Appointments: Evidence from the Private Security Market

This paper investigates the influence of managerial entrenchment on private placements by examining the firm\u27s decision to appoint representatives of the private investors to the board without shareholder approval. By analyzing a sample of U.S. firms that appoint directors in combination with private offerings between 1995 and 2000, we find that firms with greater managerial entrenchment are more likely to bypass shareholder approval. Firms that bypass shareholders are less likely to appoint independent directors or to elect one of these directors as chairman. We also show that the market reacts more positively to the private offering announcement when the firm submits its board candidates for shareholder approval. Further, firms that bypass approval underperform compared to firms that obtain it. Overall our findings suggest that managers avoid shareholder approval to perpetuate entrenchment

A Survey of Litigation in Corporate Finance

Purpose The purpose of this paper is to review research on litigation in corporate finance. Design/methodology/approach This paper surveys studies on the estimation of litigation risk, litigation costs, stock reaction to lawsuit announcement, and the effect of litigation on corporate financial policies and outcomes. Findings The first section presents a survey of studies that estimate litigation risk. The authors then discuss a set of studies that focus on the various costs associated with litigation. The third area of review is about studies which estimate the market reaction to a lawsuit announcement. The next section surveys studies that examine the relation between litigation and a variety of corporate policies, behaviors, and outcomes. The authors then discuss the emerging literature on how corporate political connections can influence the outcome of litigation. The survey concludes with a brief summary and a discussion of suggestions for future research involving corporate litigation. Originality/value By providing an extensive review of the literature on litigation in corporate finance, this survey can help researchers to identify recent trends in litigation research and select promising new avenues of investigation in the field

A Face Can Launch a Thousand Shares—and an 0.80% Abnormal Return

In this paper we examine the market reaction—price and volume—to the appearance of a firm in the Who’s News column of The Wall Street Journal. We differentiate between those firms whose articles are accompanied by a picture of an executive and a control set of firms whose articles on the same day are not accompanied by a picture. The results show a more pronounced market reaction to the “cum picture” articles, consistent with the incomplete information theory of Merton [1987] and the heuristic-based familiarity hypothesis. There is no evidence of significant long-run abnormal performance for the sample firms

The Discretionary Effect of CEOs and Board Chairs on Corporate Governance Structures

In this study we analyze the effect of latent managerial characteristics on corporate governance. We find that CEO and board chair fixed effects explain a significant portion of the variation in board size, board independence, and CEO-chair duality even after controlling for several firm characteristics and firm fixed effects. The effect of CEOs on corporate governance practices is attributable mainly to executives who simultaneously hold the position of CEO and board chair in the same firm. Our results do not show a decline in CEO discretionary influence on corporate governance after the enactment of the Sarbanes–Oxley Act and stock exchange governance regulations

Corporate Litigation and Debt

This study examines the effect of litigation risk and litigation costs on firms’ credit ratings and debt financing. The results show that litigation affects a firm\u27s creditworthiness and debt costs in two stages. Before a lawsuit filing, firms at higher risk of litigation have lower credit ratings, are more likely to be rated speculative grade, pay higher yields on loans and bonds, and are less likely to rely on debt financing. At the time of the lawsuit resolution, settlement costs have an additional effect on firm credit quality. Companies facing larger settlement disbursements in relation to their available cash experience a decline in credit ratings and an increase in yield spread. The results are robust to endogeneity concerns and different proxies of litigation risk

Rapid, Low Level Determination of Silver(I) in Drinking Water by Colorimetric–solid-phase Extraction

A rapid, highly sensitive two-step procedure for the trace analysis of silver(I) is described. The method is based on: (1) the solid-phase extraction (SPE) of silver(I) from a water sample onto a disk impregnated with a silver-selective colorimetric reagent, and (2) the determination of the amount of complexed analyte extracted by the disk by diffuse reflectance spectroscopy (DRS). This method, called colorimetric–solid-phase extraction (C–SPE), was recently shown effective in determining low concentrations (0.1–5.0 mg/ml) of iodine and iodide in drinking water. This report extends C–SPE to the trace (∼4 μg/l) level monitoring of silver(I) which is a biocide used on the International Space Station (ISS). The determination relies on the manually driven passage of a water sample through a polystyrene–divinylbenzene disk that has been impregnated with the colorimetric reagent 5-(p-dimethylaminobenzylidene) rhodanine (DMABR) and with an additive such as a semi-volatile alcohol (1,2-decanediol) or nonionic surfactant (Brij 30). The amount of concentrated silver(I) is then determined in a few seconds by using a hand-held diffuse reflectance spectrometer, with a total sample workup and readout time of ∼60 s. Importantly, the additive induces the uptake of water by the disk, which creates a local environment conducive to silver(I) complexation at an extremely high concentration factor (∼800). There is no detectable reaction between silver(I) and impregnated DMABR in the absence of the additive. This strategy represents an intriguing new dimension for C–SPE in which additives, directly loaded in the disk material, provide a means to manipulate the reactivity of the impregnated reagent

A Global Analysis of Corporate Litigation Risk and Costs

We analyze a unique hand-collected international sample of 475 corporate lawsuits involving 361 publicly-traded defendant firms headquartered in 16 developed countries to explore how country factors influence litigation risk, equity market value, lawsuit outcomes, and settlement costs. Unlike U.S.-focused studies, we do not find a significant relation between stock turnover, equity performance, and the probability of litigation. Defendant firms headquartered in civil law countries or countries with less efficient judiciary systems face lower litigation risk and costs as well as less share price decline at filing. Countries whose courts are less independent demonstrate a significant bias against foreign defendant firms

Model for screening of resonant magnetic perturbations by plasma in a realistic tokamak geometry and its impact on divertor strike points

This work addresses the question of the relation between strike-point splitting and magnetic stochasticity at the edge of a poloidally diverted tokamak in the presence of externally imposed magnetic perturbations. More specifically, ad-hoc helical current sheets are introduced in order to mimic a hypothetical screening of the external resonant magnetic perturbations by the plasma. These current sheets, which suppress magnetic islands, are found to reduce the amount of splitting expected at the target, which suggests that screening effects should be observable experimentally. Multiple screening current sheets reinforce each other, i.e. less current relative to the case of only one current sheet is required to screen the perturbation.Comment: Accepted in the Proceedings of the 19th International Conference on Plasma Surface Interactions, to be published in Journal of Nuclear Materials. Version 2: minor formatting and text improvements, more results mentioned in the conclusion and abstrac