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Motions for Lead Plaintiff in Securities Class Actions

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  • Stephen J. Choi

Abstract

Using a data set of securities class actions filed from 2003 to 2005, this study assesses the effect of the lead plaintiff presumption enacted as part of the Private Securities Litigation Reform Act of 1995 on agency costs of lead counsel for the class and class members. Examining the pretrial motions for lead plaintiff for each class action, the study reports evidence that characteristics of the selected lead plaintiff, including the amount of losses suffered, the presence of institutional investors, and the presence of institutions that are frequent movants for lead plaintiff status, are negatively correlated with attorney agency costs. The amount of competition in the lead plaintiff selection process and the formation of some (but not all) groups of lead plaintiffs are also negatively correlated with agency costs.

Suggested Citation

  • Stephen J. Choi, 2011. "Motions for Lead Plaintiff in Securities Class Actions," The Journal of Legal Studies, University of Chicago Press, vol. 40(1), pages 205-244.
    • Handle: RePEc:ucp:jlstud:doi:10.1086/658405
    DOI: 10.1086/658405
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    References listed on IDEAS

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    1. Francis, J & Philbrick, D & Schipper, K, 1994. "Shareholder Litigation And Corporate Disclosures," Journal of Accounting Research, Wiley Blackwell, vol. 32(2), pages 137-164.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    3. Stephen J. Choi, 2007. "Do the Merits Matter Less After the Private Securities Litigation Reform Act?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 598-626, October.
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    Cited by:

    1. Fang Fang & Wang Tian & Zhang Yanfei, 2023. "Test on the law protection of minority investors in China: Perspective of misrepresentation in securities market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1642-1655, April.
    2. Stephen J. Choi & Drew T. Johnson‐Skinner & A. C. Pritchard, 2011. "The Price of Pay to Play in Securities Class Actions," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 8(4), pages 650-681, December.
    3. Stephen J. Choi & Jessica Erickson & A. C. Pritchard, 2020. "Working Hard or Making Work? Plaintiffs’ Attorney Fees in Securities Fraud Class Actions," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 17(3), pages 438-465, September.
    4. Allen Huang & Kai Wai Hui & Reeyarn Zhiyang Li, 2019. "Federal Judge Ideology: A New Measure of Ex Ante Litigation Risk," Journal of Accounting Research, Wiley Blackwell, vol. 57(2), pages 431-489, May.

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