More on monumental litigation and its share-price consequences

Bet-the-company litigation may be rare but expensive, long-running and important litigation is more common (See my post of Feb. 28, 2006 chastising the over-use of that term.). A previous post explained some of the ways law departments treat major litigation differently (See my post of Feb. 20, 2006.) I have also commented on the FASB 5 obligation to set reserves (See my post of March 12, 2005 about setting reserves.)

Event studies (See my post of May 4, 2005 about event studies and patent litigation), which sometimes look at changes in share value when major litigation starts or ends, have something else to contribute. In that regard, a recent court decision in Rhode Island regarding lead-paint litigation caused the market cap of Sherwin-Williams to plummet more than $1 billion, or 30 percent (Economist, March 4, 2008 at 59.)

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