Did The Private Securities Reform Act Work As Congress Intended?

In 1995 Congress passed the Private Securities Litigation Reform Act to address several perceived abuses in securities fraud class actions. In the aftermath of Enron, WorldCom, and other high profile securities litigation, critics suggest that the law made it easier for firms to escape securities fraud liability and thus created a climate conducive to fraud. Proponents maintain that the PSLRA has deterred the filing of nonmeritorious cases. This article explores whether the PSLRA achieved Congress's twin goals of "curb[ing] frivolous, lawyer-driven litigation, while preserving investors' ability to recover meritorious claims." The empirical evidence suggests that, in many respects, the PSLRA did achieve several of Congress' goals. There has been a reduction in the number of securities class actions filed. The PSLRA has improved overall case quality, particularly in the circuit with most stringent interpretation of the heightened pleading standard. In general, Congress seems to have achieved its goal of reducing the race to the court by increasing the filing delay in securities class actions. However, a stricter interpretation of the pleading standard does not affect this. The PSLRA does little to reduce the incidence of litigation for high technology issuers, but the evidence suggests that the litigation risk has substantially decreased for these issuers. Overall, the monitoring of attorney's effort increased, but institutional investors are no better at monitoring than other lead plaintiffs. The findings also suggest that lead plaintiffs forcing plaintiff's attorneys to compete for designation as lead counsel has resulted in lower attorney's fees. The observed effect is greater when the lead plaintiff is an institutional investor.

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

Campus Only Dissertation

Discipline thesis:degree_discipline

Business Administration

Year dc:date.available

2009

Author dc:creator

• Morris, Marc Everette

Contributors dc:contributor

• Ketz,Ed
• Odom,Marcus

• accounting fraud
• class action lawsuits
• insider trading
• litigation risk
• Private Securities Litigation Reform Act
• securities litigation

Repository record dc:identifier

https://opensiuc.lib.siu.edu/dissertations/19

OAI identifier oai:identifier

oai:opensiuc.lib.siu.edu:dissertations-1019