The role of economic analysis in shareholder actions in the UK

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The authors provide a summary of key financial economics concepts that may be important in the context of UK shareholder actions.

Sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA) provide remedies for shareholders in the event of losses caused by allegedly false or misleading statements. As the litigation landscape in the UK continues to evolve, the FSMA is arguably making it easier to bring class actions on behalf of a large group of investors.

Financial economists routinely use event studies to analyze the effect on stock prices of new information that becomes public.

The experience of securities litigation in the United States suggests that various approaches in the field of financial economics can be applied in the United Kingdom. However, it is important to recognize the limitations of these approaches to drawing reliable inferences and conclusions in shareholder litigation.

Using hypothetical case examples, authors Ronnie Barnes, Kristin Feitzinger, Greg Leonard and Shaama Pandya provide a summary of key financial economics concepts that may be important in the context of UK shareholder actions :

  • Analyze stock prices and market efficiency
  • Treatment of damage and causation
  • Assessing Investor Confidence in Alleged Misrepresentations
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