Other litigation : a new measure of 10b-5 class action litigation risk

Abstract

This thesis proposes a litigation risk measure based on other past federal contract and state-based litigation, firm characteristics, industry and federal judge ideology. This thesis finds that other litigation complements existing measures of litigation risk and is economically meaningful in predicting litigation occurrence and D&O insurance premia. First, this thesis finds that firms with higher federal contract and state-based litigation verdicts and settlements are more likely to face securities class-action lawsuits in the future, the effects are economically significant, and the results hold with and without firm and year fixed effects. Second, this thesis finds that firms with higher federal contract-based litigation settlements are more likely to face higher D&O insurance premia, the effects are economically significant, and the results hold with and without firm and year fixed effects.