The Causes and Consequences of Securities Class Action Litigation, by Brian Carson McTier, University of Texas at San Antonio, and John K. Wald, University of Texas at San Antonio, was recently posted on SSRN.  Here is the abstract:

We test explanations for securities class action lawsuits consistent with both rent-seeking and managerial agency problems. We find some evidence that proxies for both explanations help explain which firms are sued. Contrary to past studies, we find little evidence that CEO characteristics contribute to the probability of suit. We also find significant evidence that post-suit firms improve governance mechanisms and reduce agency problems. Specifically, post-suit, firms’ leverage and cash retained increase, while diversification and investments decrease. We also find evidence that CEO turnover and idiosyncratic risk increase following a class action suit whereas proxies for management entrenchment decrease. Overall the results suggest that class action lawsuits drive firms to reduce over investment and increase focus.