GMI Ratings has released a full-year 2012 results for its Litigation Risk Model. The study found that a majority of companies facing Federal class action lawsuits were ranked in the lowest 20% of the risk ratings distribution a year before the lawsuit was filed.
53% of the companies that had federal securities class actions filed against them in the United States in 2012 were classified in the lowest ratings quintile a year before the lawsuit was filed. Only 4% were ranked in the highest quintile.
As of the quarter closest to the filing, 63% of all companies facing class actions were ranked in GMI Ratings’ worst quintile. Fewer than 1% were in the best quintile.
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