Research Handbook on Representative Shareholder Litigation
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Research Handbook on Representative Shareholder Litigation

Edited by Sean Griffith, Jessica Erickson, David H. Webber and Verity Winship

Written by leading scholars and judges in the field, the Research Handbook on Representative Shareholder Litigation is a modern-day survey of the state of shareholder litigation. Its chapters cover securities class actions, merger litigation, derivative suits, and appraisal litigation, as well as other forms of shareholder litigation. Through in-depth analysis of these different forms of litigation, the book explores the agency costs inherent in representative litigation, the challenges of multijurisdictional litigation and disclosure-only settlements, and the rise of institutional investors. It explores how related issues are addressed across the globe, with examinations of shareholder litigation in the United States, Canada, the United Kingdom, the European Union, Israel, and China. This Research Handbook will be an invaluable resource on this important topic for scholars, practitioners, judges and legislators.
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Chapter 2: Securities class actions and severe frauds

James J Park

Abstract

The chapter examines the impact of the Private Securities Litigation Reform Act (PSLRA) on securities class actions in light of the severe frauds that occurred in the years after its passage. These years coincided with a period of significant accounting restatements. Securities class actions thus often addressed what were believed to be severe frauds at large public companies. In light of these lawsuits, the PSLRA’s assumption that securities class actions do no more than harass companies with volatile stock prices is no longer valid. This narrative may have been true before the PSLRA, but it has been displaced in part by examples of securities class actions that have provided investors with a remedy for the worst frauds. This success will likely secure the survival of the securities class action for another generation, but also raises new questions about how to ensure that such actions are effective in addressing severe frauds.

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