Author Type

Graduate Student

Date of Award

2007

Document Type

Dissertation

Publication Status

Version of Record

Submission Date

October 2026

Thesis/Dissertation Advisor [Chair]

Skantz, Terrance R.

Abstract

Under Rule 10b-5 of the Securities Exchange Act of 1934, investors are provided a cause of action for losses resulting from management's intentionally deceptive disclosure or non-disclosure of information. Since lawsuits are costly, managers should be motivated to avoid a securities fraud class action. Prior research argues that managers attempt to mitigate the adverse effects of class actions by preempting negative eamings surprises (Skinner 1994 ). However, this study argues that when a firm is overvalued, managers have incentives to avoid value reducing disclosure, which may lead to the violation of securities fraud laws. I investigate this assertion by testing associations between overvalued equity and the two outcomes of a securities fraud class action: dismissals and settlements. Other relevant factors related to overvalued equity are also tested and measured. These other factors include cases where the lead plaintiff is an institution, the length of the class period, the intrinsic value of exercisable CEO in-the-money stock option holdings, and corporate governance as measured by a corporate governance score and the occurrence of a GAAP violation. Findings show that the likelihood of a non-dismissal increases when an institution is the lead plaintiff and CEOs of overvalued firms hold higher amounts of in-the-money options. In addition, results suggest that for overvalued firms, stronger governance increases the probability of a non-dismissal.

Extent

87 p.

Comments

Dissertation (Ph.D.)--Florida Atlantic University, 2007.|College of Business|FAU Electronic Theses and Dissertations Collection|Dissertation (Ph.D.)--Florida Atlantic University, 2007.

Identifier

FA00000305

Format

pdf

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