Document Type

Article

Publication Title

University of Pennsylvania Law Review

Abstract

This Article seeks to extend the previous empirical shareholder litigation work and provide a broad-based examination of securities class actions in the new-issues market. Because we look at the entire sample of equity IPOs from 1975 to 1986, we avoid the small sample size problems of Alexander's study and the bias problems of. Drake and Vetsuypens's work. Importantly, unlike other previous empirical work, we focus not only on those firms that were sued but also on those firms that were not sued. In fact, 3396 IPOs in our sample of 3519 IPOs were not subjects of lawsuits. Through a comparison of the differences between the two sets of firms, we hope to test more accurately the enforcement versus strike-suit theories. Part I introduces the enforcement versus strike-suit theories of securities class actions. Part II describes the empirical sample of IPOs used in our study. We provide several summary statistics of the IPO sample and the incidence of suits in Part II as well as the implications for plaintiffs' attorneys' incentives and the overall level of private securities law enforcement. Part III presents our tests of the enforcement against the strike-suit theories of securities-fraud class actions.

First Page

903

DOI

https://doi.org/10.2307/3312595

Volume

144

Publication Date

1996

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