Matthew McCarten and Ivan Diaz-Rainey
The purpose of this paper is to examine how the filing of a securities class action, and associated corrective actions taken by management, impact the operating performance of…
Abstract
Purpose
The purpose of this paper is to examine how the filing of a securities class action, and associated corrective actions taken by management, impact the operating performance of sued firms.
Design/methodology/approach
A matched sample is formed three years prior to the filing of a class action, as opposed to the traditional one year used in the literature. Match adjusted performance is analyzed from three years prior to the filing to five years after. Further the authors analyze the impact corrective actions have on operating performance.
Findings
The results show that operating underperformance happens considerably earlier than had hitherto been believed. Further, there is no evidence that the filing adversely affects performance, rather securities class actions appear to act as a turning point. The findings also indicate that firms that increase leverage post filing, experience subsequent increases in their operating performance.
Originality/value
The results show that rather than leading to a deterioration in performance, as is currently understood, the filing of a securities class actions results in improved operating performance. This improvement is, in part, associated with more optimal use of leverage by management. Overall, class actions appear to be an effective disciplinary mechanism.
Details
Keywords
The learning outcomes are as follows: successful students will demonstrate an understanding of challenges in producing and delivering a product in emerging economies; they will be…
Abstract
Learning outcomes
The learning outcomes are as follows: successful students will demonstrate an understanding of challenges in producing and delivering a product in emerging economies; they will be able to analyze the tradeoffs in operational decisions of a social enterprise; and students will apply supply chain principles to solve social and environmental challenges.
Case overview/synopsis
Carbon Roots International is a social enterprise in Haiti producing and selling charcoal from sugar cane waste. Their operational challenge is designing a supply chain, which enables them to accomplish their social goals while building a profitable enterprise.
Complexity academic level
This case can be used in graduate operations management and supply chain management courses. The company in the case is a social enterprise.
Supplementary materials
Teaching Notes are available for educators only.
Subject code
CSS 9: Operations and Logistics