Cole, Emily C2015-06-222015Emily Cole Groden, Decoding the Market's Reaction to Settlement Announcements (Harvard Law School Roger Fisher and Frank E.A. Sander Student Writing Prize, May 2015).http://nrs.harvard.edu/urn-3:HUL.InstRepos:16659300Harvard Law School Roger Fisher and Frank E.A. Sander Student Writing Prize, May 2015This study examines defendant stock price returns on the day preceding, the day of, and the day following announcements of settlements in various types of litigation from 2009 through 2014. I hypothesized that defendant returns would be significantly positive on the day of and the day following the announcement, regardless of the settlement amount, due to the market’s perception of a decrease in cost and uncertainty associated with litigation. I further hypothesized that defendant returns would not be significantly positive on the day preceding the announcement, because the market presumably should not have had a reason to react. The results of my analysis support my first hypothesis; however, they also show a significant positive market reaction on the day preceding the announcement. This effect is likely due to the leakage of the settlement announcement and suggests future research should consider a larger event window.Other writings2015-06-22