June 3, 2009

PSLRA, the class-action reform legislation, was intended to -- and has -- drawn large institutional investors such as pension funds and universities into much more important roles as players in securities litigation, in contrast with the earlier model in which such suits were almost entirely driven by an entrepreneurial bar. Now a new study on SSRN by Agnes Cheng (LSU), Henry He Huang (Prairie View A&M), Yinghua Li (Purdue), and Gerald Lobo (U. of Houston), summarized by Kevin LaCroix, suggests that the results of this shift have been largely favorable as to corporate governance objectives, and have also tended to raise payouts to investors in the litigation itself.