Document Type
Article
Publication Title
Journal of Empirical Legal Studies
Publication Date
2012
Volume
9(2)
First Page
368
DOI
https://doi.org/10.1111/j.1740-1461.2012.01257.x
Abstract
The PSLRA’s lead plaintiff provision enlisted institutional investors to monitor class counsel in order to curb the agency costs endemic in securities class actions. This article uses a sample of 731 settlements to examine the efficacy of this provision. It finds that, even when controlling for institutional self-selection of potentially easier or higher-quality cases, cases with public pension lead plaintiffs have larger recoveries and lower fee requests and fee awards than cases with other lead plaintiff types. The article also finds evidence consistent with the existence of a significant positive externality associated with public pension participation. Over time, fee requests and fee awards have on average declined significantly even in cases without such lead plaintiffs. These findings suggest that public pensions act as more effective monitors of class counsel than traditional plaintiffs and that the lead plaintiff provision has substantially reduced the transactions costs associated with securities class actions.
Comments
This is the pre-print version of the following article: Institutional Activism Through Litigation: An Empirical Analysis of Public Pension Fund Participation in Securities Class Actions, 9 Journal of Empirical Legal Studies, 368–392 (June 2916) which has been published in final form at https://doi.org/10.1111/j.1740-1461.2012.01257.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.