have disclosed irregularities publicly before disseminating the information it is quite possible that corporations have begun handling issues in house. Once information regarding a potential threat is released the door flies open for class action suits if there is any drastic change in stock price therefore the decrease in filings could be a result of better communication of facts to the public. Uncertain circumstances create volatility in the stock price thus efficient communication of known facts and resolutions could creatPossible Reasons for the Decline of Filings

1.The passage of Sarbanes-Oxley (SOX) in 2002 SOX has public companies on the forefront of documenting controls and establishing corporate governance. Some think that this oversight has limited fraud therefore there is less of a need for shareholder class actions. Although the research considers the differences across industries and court circuits there is not supporting evidence that proves a correlation of SOX regulation to the decrease in federal filings.

2.Law firms that are the largest filers are currently tied up in legal battles Firms such as Milberg Weiss have been subject to high profile federal trials that have led to serious losses for their partnership. Lerach Coughlin on the other hand has had much of their resources tied up with the Enron case that has turned into the largest settlement to date and the costs are still adding up. If it were the case that firms were having limited resource problems therefore unable to file lawsuits then the public could suspect a rise in litigation as these suits pan out. Although contrary to this argument, it would seem to be true that firms of this size would not have trouble mobilizing a large offensive for promising cases thus there must be a lack of eye-opening opportunities.

3.Significant increases in dismissal rates of lawsuits Beginning since the 1995 passage of the Private Securities Litigation Reform Act (PSLRA) the number of dismissals of cases filed has nearly doubled. In recent years dismissals have been the result of 38.2% of cases filed. Although the rates vary by court and seem relatively high according to the research the numbers may be misleading because they incorporate those that may have been subsequently appealed or reversed.

Although any number of possibilities may explain the decrease in filings, I contend the law firms limited resources and dismissal rate arguments fail to account for the corporate response to outside litigation. After witnessing what has been done to companies that have disclosed irregularities publicly before disseminating the information it is quite possible that corporations have begun handling issues in house. Once information regarding a potential threat is released the door flies open for class action suits if there is any drastic change in stock price therefore the decrease in filings could be a result of better communication of facts to the public. Uncertain circumstances create volatility in the stock price thus efficient communication of known facts and resolutions could create

federal filings.

2.Law firms that are the largest filers are currently tied up in legal battles Firms such as Milberg Weiss have been subject to high profile federal trials that have led to serious losses for their partnership. Lerach Coughlin on the other hand has had much of their resources tied up with the Enron case that has turned into the largest settlement to date and the costs are still adding up. If it were the case that firms were having limited resource problems therefore unable to file lawsuits then the public could suspect a rise in litigation as these suits pan out. Although contrary to this argument, it would seem to be true that firms of this size would not have trouble mobilizing a large offensive for promising cases thus there must be a lack of eye-opening opportunities.

3.Significant increases in dismissal rates of lawsuits Beginning since the 1995 passage of the Private Securities Litigation Reform Act (PSLRA) the number of dismissals of cases filed has nearly doubled. In recent years dismissals have been the result of 38.2% of cases filed. Although the rates vary by court and seem relatively high according to the research the numbers may be misleading because they incorporate those that may have been subsequently appealed or reversed.

Although any number of possibilities may explain the decrease in filings, I contend the law firms limited resources and dismissal rate arguments fail to account for the corporate response to outside litigation. After witnessing what has been done to companies that have disclosed irregularities publicly before disseminating the information it is quite possible that corporations have begun handling issues in house. Once information regarding a potential threat is released the door flies open for class action suits if there is any drastic change in stock price therefore the decrease in filings could be a result of better communication of facts to the public. Uncertain circumstances create volatility in the stock price thus efficient communication of known facts and resolutions could creat

its then the public could suspect a rise in litigation as these suits pan out. Although contrary to this argument, it would seem to be true that firms of this size would not have trouble mobilizing a large offensive for promising cases thus there must be a lack of eye-opening opportunities.

3.Significant increases in dismissal rates of lawsuits Beginning since the 1995 passage of the Private Securities Litigation Reform Act (PSLRA) the number of dismissals of cases filed has nearly doubled. In recent years dismissals have been the result of 38.2% of cases filed. Although the rates vary by court and seem relatively high according to the research the numbers may be misleading because they incorporate those that may have been subsequently appealed or reversed.

Although any number of possibilities may explain the decrease in filings, I contend the law firms limited resources and dismissal rate arguments fail to account for the corporate response to outside litigation. After witnessing what has been done to companies that have disclosed irregularities publicly before disseminating the information it is quite possible that corporations have begun handling issues in house. Once information regarding a potential threat is released the door flies open for class action suits if there is any drastic change in stock price therefore the decrease in filings could be a result of better communication of facts to the public. Uncertain circumstances create volatility in the stock price thus efficient communication of known facts and resolutions could creat

ears dismissals have been the result of 38.2% of cases filed. Although the rates vary by court and seem relatively high according to the research the numbers may be misleading because they incorporate those that may have been subsequently appealed or reversed.

Although any number of possibilities may explain the decrease in filings, I contend the law firms limited resources and dismissal rate arguments fail to account for the corporate response to outside litigation. After witnessing what has been done to companies that have disclosed irregularities publicly before disseminating the information it is quite possible that corporations have begun handling issues in house. Once information regarding a potential threat is released the door flies open for class action suits if there is any drastic change in stock price therefore the decrease in filings could be a result of better communication of facts to the public. Uncertain circumstances create volatility in the stock price thus efficient communication of known facts and resolutions could creat

have disclosed irregularities publicly before disseminating the information it is quite possible that corporations have begun handling issues in house. Once information regarding a potential threat is released the door flies open for class action suits if there is any drastic change in stock price therefore the decrease in filings could be a result of better communication of facts to the public. Uncertain circumstances create volatility in the stock price thus efficient communication of known facts and resolutions could create fewer filings than the announcement of an accounting investigation with no further details.

Although the SOX explanation is criticized by the statistical research I think acknowledging it as a factor is important. In the short term it is possible that SOX has encouraged corporations to realize the importance of governance even if compliance is related to the media’s coverage of the SOX penalties. Since the largest settlements have resulted in corporate liquidations it is possible that investors are wary of tanking their investment for the reward of pennies on the dollar for their shares received through litigation. Since there has been such as substantial change in settlement amounts it is important to evaluate the reasons why.