@article{59c639ae55824200b791df0a4204149f,
title = "Industry effects of interfirm lawsuits: Evidence from Pennzoil v. Texaco",
author = "Michael Hertzel and Smith, {Janet Kiholm}",
note = "Funding Information: We wish to thank Hank Bessembinder, Roger Faith, and Richard Smith for comments and useful discussion. Kok-Hui Tan provided excellent research assistance. Financial support from the Center for Financial System Research at Arizona State University is acknowledged. 1. Pennzoil Co. v. Texaco, Inc., No. 84-05905 (1st Dist., Harris County) aff'd, 729 S.W. 2d 768 (Tex. Civ. App.), writ.ref., S.W. 2d (Texas Sup. 1987)). This case is noted not only for the large stock price movements discussed below, but also for the puzzling failure of the parties to settle more quickly and for the equity market value changes at the time of Texaco's announcement of filing for bankruptcy. See Bundy (1989) and Mnookin and Wilson (1989), who provide analyses of the settlement process in this dispute. A more general analysis of the economics of litigation and settlement appears in Priest and Klein (1984). 2. Also see Wier (1983), who examines stock market reactions to lawsuits challenging mergers. Bhagat, Brickley, and Coles (1992) examine stock market responses to 355 announcements of filings, settlements, and verdicts in interfirm lawsuits. They find plaintiffs experience wealth gains from filings, whereas defendants suffer wealth losses, and that parties to lawsuits experience joint wealth gains from settlement versus going to trial. Copyright: Copyright 2010 Elsevier B.V., All rights reserved.",
year = "1993",
month = oct,
language = "English (US)",
volume = "9",
pages = "425--444",
journal = "Journal of Law, Economics, and Organization",
issn = "8756-6222",
publisher = "Oxford University Press",
number = "2",
}