An Economic Analysis On The Mode Of Securities Litigation

In recent years, a series of cases that damage small shareholders happened in listed companies both in and outside China, as "Erron Event" in US, "Zhongke Chuangye" and "Yinguangxia" in China, etc. Consequently, how to protect the investors' interests becomes a key point to both the law constitutors and securities regulators. One of the most effective ways is to build comprehensive system of civil compensation and lawsuit for securities.There are various ways for shareholders to protect their own rights through lawsuit process. Among them, separate action, joint action and group action are three basic methods. In justice practice, most countries apply group action, however, it takes false statement of civil conflict in securities as separate action, joint action in China, which brings intense debates in both academic and practical sides.This paper tries to analyze above three different ways in securities litigation from economic point of view with both substantive law and procedural law levels, which belongs to the research scope of economic analysis of law. From methodology side, we focus on game theory, analyze the game relationship between small shareholders and listed companies under joint action and class action, and discuss the effectiveness of preventing action of tort from listed companies under various of lawsuit system. The analysis results in this paper indicates, small investors initiating the lawsuit cannot prevent action of tort from listed companies under joint action, however class action can effectively solve this kind of conflict in securities. ?We think, there are two meaningful points for small investors in China from the research in this paper: On one side, we should develop institutional investors under joint action system. On the other side, actively introduce some good points in class action, improve current representative action in China that with the uncertain number of people.