Shareholder class actions are a blunt weapon that make no sense
Using the courts to punish shareholders for disclosure breaches that also hit share prices is double jeopardy and lets boards and management off the hook.
Class actions enable a group of individuals who have suffered similar losses to band together and share the costs of legal action in pursuit of compensation that would otherwise be infeasible. Litigation funders further facilitate that process through fee structures that link remuneration to outcomes achieved.
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Kevin Davis is Professor of Finance at The University of Melbourne.
