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Can ‘delitigation’ transform an industry?

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  • DeLong, Gayle

Abstract

I investigate whether removing product liability – “delitigation” – affects a firm’s market value. This research sheds light on the influence of litigation risk on firm value. Using the vaccine industry as an example, I find the average market return to the licensing of a new vaccine increases after the passage of legislation that removed most product liability for vaccines. While average market return to the licensing of any new drug that a vaccine maker produced also increases, returns to drug firms that do not make vaccines remain the same after the legislation. Company risk-taking enhances market reaction to the announcement of a new vaccine. Delitigation appears to contribute to the transformation of vaccine makers.

Suggested Citation

  • DeLong, Gayle, 2018. "Can ‘delitigation’ transform an industry?," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 245-254.
    • Handle: RePEc:eee:quaeco:v:67:y:2018:i:c:p:245-254
    DOI: 10.1016/j.qref.2017.07.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Product liability; Regulated industries; National Childhood Vaccine Injury Act;
    All these keywords.

    JEL classification:

    • K3 - Law and Economics - - Other Substantive Areas of Law
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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