“…To be included as a nonsued match, the matched firm must have had its IPO within +/− six months of the sued firm, must not have been involved in any securities litigation during our sample period, must belong to the same industry, and must be similar to the sued firm with respect to size and return momentum, as measured by total return over a period from four quarters to one quarter before the lawsuit (from T −4 to T −1). Specifically, we follow the approach by Sibley and Burch () and Antunovich and Sarkar () and select a control firm for every event firm in our sample by minimizing the global distance between the two firms as follows: where d i is the Euclidean distance between the event firm i and control firm c , Size T −4 ,i and Size T −4 ,c are the market capitalizations of firm i and control firm c at time T −4, and Ret T −4, T −1 ,i and Ret T −4 ,T −1, c are the returns for the two firms, calculated over the three‐quarter period between time T −4 and time T −1. Finally, and are the cross‐sectional variances of the average market values and returns, respectively.…”