We are grateful to Adam Savett for providing the data examined in this article and for several helpful discussions.
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Predicting Securities Fraud Settlements and Amounts: A Hierarchical Bayesian Model of Federal Securities Class Action Lawsuits
Article first published online: 23 JUL 2012
DOI: 10.1111/j.1740-1461.2012.01260.x
Copyright © 2012 Cornell Law School and Wiley Subscription Services, Inc.
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How to Cite
McShane, B. B., Watson, O. P., Baker, T. and Griffith, S. J. (2012), Predicting Securities Fraud Settlements and Amounts: A Hierarchical Bayesian Model of Federal Securities Class Action Lawsuits. Journal of Empirical Legal Studies, 9: 482–510. doi: 10.1111/j.1740-1461.2012.01260.x
Publication History
- Issue published online: 23 JUL 2012
- Article first published online: 23 JUL 2012
- Abstract
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This article develops models that predict the incidence and amount of settlements for federal class action securities fraud litigation in the post-PLSRA period. We build hierarchical Bayesian models using data that come principally from Riskmetrics and identify several important predictors of settlement incidence (e.g., the number of different types of securities associated with a case, the company return during the class period) and settlement amount (e.g., market capitalization, measures of newsworthiness). Our models also allow us to estimate how the circuit court a case is filed in as well as the industry of the plaintiff firm associate with settlement outcomes. Finally, they allow us to accurately assess the variance of individual case outcomes revealing substantial amounts of heterogeneity in variance across cases.