Shareholder Class Actions: An Effective Corporate Governance Mechanism?

There have been 14 shareholder class actions against members of the top 200 companies in Australia in the past year, with total settlements in the last 20 years worth more than $1 billion, over $480 million of which was paid out in 2012.1 Shareholder class actions (SCAs) are providing an increasingly popular avenue of recourse to aggrieved investors who suffer loss as a result of inadequate corporate governance behaviours. This project will analyse the role and development of SCAs as a disciplining mechanism for market participants through an analysis of share price responses, changes in corporate governance and management and other key variables around the initiation and cessation of SCA activity. As part of this project, a comparative analysis of the use of SCAs in other influential jurisdictions including the US and Canada will be undertaken to identify similarities and differences in the use and efficacy of this nascent corporate governance mechanism.

Shareholder class actions improve disclosure quality and serve as an effective addition to the overall suite of enforcement actions.