TY  - JOUR
AU  - Cutler,David M.
AU  - Summers,Lawrence H.
TI  - The Costs of Conflict Resolution and Financial Distress:  Evidence from the Texaco-Pennzoil Litigation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2418
PY  - 1989
Y2  - July 1989
UR  - http://www.nber.org/papers/w2418
L1  - http://www.nber.org/papers/w2418.pdf
N1  - Author contact info:
David M. Cutler
Department of Economics
Harvard University
1875 Cambridge Street
Cambridge, MA  02138
Tel: 617/496-5216
Fax: 617/496-8951
E-Mail: dcutler@harvard.edu

Lawrence H. Summers
Harvard Kennedy School of Government
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-9322
Fax: 617/495-0436
E-Mail: lhs@harvard.edu
AB  - This paper uses data on the abnormal returns earned by the shareholders of Texaco and Pennzoil to examine whether resources were "lost" in the course of the litigation. We find that the leakage involved in the forced transfer is enormous: each dollar of value lost by Texaco's shareholders has been matched by only about 30 cents gain to the owners of Pennzoil. Our estimates suggest that the Texaco-Pennzoil conflict has reduced the combined equity value of the two companies by about $2 billion. Further losses have been suffered by Texaco's bondholders, though these may be offset by the tax collections that would result if Texaco made a large payment to Pennzoil.
ER  -