The Effect of Compensation System on the Dispute Resolution of Securities False Statement in China: A Law and Economics Analysis

Abstract

Abstract This article examines the effects of compensation system in the dispute resolution of securities false statement. Firstly, this paper develops an evolutionary game model to analyze the evolutionary stable strategy (ESS) of the dispute resolution. Then, we analyze the factor which influence the choice of the parties from an economics perspective. Expected compensation and expected systemic risk are more influential to the decision of the parties by derivation. Moreover, we test the theoretical deduction with statistics description of the private securities litigation in China. In conclusion, the irrational expectation of the litigation income, which influences the strategy selection of the parties and results in more lawsuits.