Quantifying executive threats: shareholder litigation
by Andrew D. Banasiewicz
International Journal of Business Competition and Growth (IJBCG), Vol. 4, No. 1/2, 2015

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.

Online publication date: Thu, 16-Jul-2015

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