selection begins with a search of the Securities Class
Action Clearinghouse web site for private securities
litigation between 1997 and 2005 that were subsequently settled. The sample consists
of securities lawsuits that were initiated by shareholders under SEC Rule 10b-5 and
each lawsuit alleged fraud in connection with the purchase or sale of the defendant
firm’s securities.
Of the 347 securities lawsuits identified, 44 lawsuits with missing monetary penalty
data are excluded.
Data from the Center for Research in Security Prices (CRSP) database is used to calculate the three-day investor reaction around the end of class period date.
Firm characteristics data is obtained from Compustat. Securities lawsuit
allegations data is from the Securities Class Action Clearinghouse web site. CEO
turnover data is from the Execucomp database and Lexis Nexis. SEC Form 10-K filings
are used to expand the firm characteristics data. Accordingly, 210 firms are deleted
from the sample because of unavailable CRSP, firm characteristics, lawsuit allegations
and CEO turnover data, resulting in a final sample of 93 firms[5].