Title: Quantifying executive threats: shareholder litigation

Authors: Andrew D. Banasiewicz

Addresses: Metropolitan College, Boston University, 755 Commonwealth Avenue, Boston, MA 02215, USA

Abstract: Threats confronting directors and officers of publicly traded companies are among the least understood dimensions of operational risk, all while the key manifestation of those threats - shareholder class action (SCA) litigation - counts among the most economically and reputationally damaging risks. The goal of the research outlined here is to offer a general overview of SCA as a key expression of executive threat, with a particular emphasis on one of the key root cause of those suits: accounting restatements. Representing corrections of, or amendments to earlier disclosed company performance details, restatements are recast in a more informationally-revealing context of 'restatement-type-materiality' conjoint, which yields a deeper theoretical understanding of conditions under which corrections of earlier released management disclosures can lead to significant heightening of executive risk. Also discussed is a general outline of a multi-attribute exposure assessment approach, which amalgamates multiple risk heightening proxies into a single evaluative framework.

Keywords: executive risk; securities class action litigation; director liability; officers liability; accounting restatements; executive threats; risk assessment; risk analysis; SCA; shareholder class actions; risk estimation; risk measurement; shareholder litigation.

DOI: 10.1504/IJBCG.2015.070667

International Journal of Business Competition and Growth, 2015 Vol.4 No.1/2, pp.98 - 114

Available online: 16 Jul 2015 *

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