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Stock losses soar in accounting-related class actions: Cornerstone


The number of securities class action filings with accounting-related allegations remained about the same in 2013 compared with 2012, but the market capitalization of losses associated with these filings more than doubled, Cornerstone Research Inc. said in an analysis.

According to the Boston-based company, there were 47 accounting case filings in 2013 compared with 46 in 2012. However, the change in the defendant firms’ market capitalization on the day before and the day after a class action was filed increased 155% to $44.8 billion in the accounting cases.

Meanwhile, the number of settlements in accounting-related class actions has remained relatively low, ranging from 33 to 44 per year from 2011 through 2013 compared with 58 to 75 per year in 2004 through 2010, according to the study.

Cornerstone said previous two years have been marked by an absence of new types of securities class actions, such as those involving Chinese reverse mergers.

“While there were very few new Chinese reverse merger cases filed in 2013, over 30% of accounting case settlements were (Chinese reverse merger) cases. The presence of these cases, which tend to involve smaller firms and lower shareholder losses, contributed to a drop in the total value of accounting case settlements,” Laura Simmons, a senior adviser at Cornerstone, said in a statement.

These cases “are also different in that they more frequently name auditors as defendants,” she said.

Copies of the report, “Accounting Class Action Filings and Settlements 2013 Review and Analysis,” are available here.

A March report by Cornerstone found that total settlements for all securities class action lawsuits increased 46% in 2013 to $4.77 billion.