Thomas, Randall S.; Thompson, Robert B. --- "Empirical Studies of Representative Litigation" [2012] ELECD 464; in Hill, A. Claire; McDonnell, H. Brett (eds), "Research Handbook on the Economics of Corporate Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Corporate Law

Editor(s): Hill, A. Claire; McDonnell, H. Brett

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848449589

Section: Chapter 9

Section Title: Empirical Studies of Representative Litigation

Author(s): Thomas, Randall S.; Thompson, Robert B.

Number of pages: 18

Extract:

9. Empirical studies of representative litigation1
Randall S. Thomas and Robert B. Thompson



1. INTRODUCTION
Shareholder litigation has long played a prominent role in corporate governance as a check
on possible management misconduct. As compared to other possible constraints ­ markets,
private ordering via monitors and incentives, norms, and government regulation, to name a
few ­ shareholder litigation has been used more in the United States than elsewhere. In an
economy of public companies with large numbers of shareholders and few large block hold-
ers, there have been recurring concerns about the incentives of those who bring such litiga-
tion (and their lawyers) and the outcomes that result. From the Wood report in the 1940s to
the Private Securities Litigation Reform Act of 1995, legislatures and courts have responded
to these concerns with new regulation of such litigation. As empirical work has grown over
the last several decades to assume a core position in the study of corporate law, representa-
tive shareholder litigation has been a frequent topic. This chapter seeks to explain what
empirical studies have told us about representative litigation and how such studies have
shaped our understanding of corporate law.


2. OVERVIEW

Litigation Embedded Within a Nexus of Managerial Constraints

American corporate governance is a combination of state and federal law in a mix that has
changed over time (usually in the direction of a greater role for federal law). Understanding
the role of litigation in corporate law therefore requires coverage of two sets of laws and the
integration ...