Shareholder Class Action Suits and the Bond Market
58 Pages Posted: 14 Jan 2012
There are 2 versions of this paper
Shareholder Class Action Suits and the Bond Market
Date Written: January 13, 2012
Abstract
Using a sample of 2,241 shareholder lawsuits from 1996 through 2008, we identify 579 lawsuit firms (26%) with publicly traded bonds. We find a mean [median] excess bond return of -2.59% [-1.83%], and a significant increase in trading volume for these bonds around the class action filing date. The excess bond returns are more negative for more risky bonds, when the ex ante merits of the lawsuit are higher, when a debtholder is a co-plaintiff, and when the complaint has a debt allegation. We also examine the relationship between bondholder and shareholder returns. We find no evidence of an expropriation of wealth between claimants. We do find that the bond market incorporates the negative news leading up to and encompassing the filing date more quickly than the stock market. We attribute this result to the bond market being traded primarily by institutional investors.
Keywords: class action, Bond market
JEL Classification: G30
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Large-Sample Evidence on the Debt Covenant Hypothesis
By Ilia D. Dichev and Douglas J. Skinner
-
How Does Financing Impact Investment? The Role of Debt Covenants
By Sudheer Chava and Michael R. Roberts