Litigation fears affect financial disclosures.

Fear of litigation is having a chilling effect on voluntary financial disclosures, according to a survey of chief executive officers of companies on the American Stock Exchange (AMEX). Three-quarters of the respondents said they did not disclose certain forward-looking information because of stockholders' increasing tendency to file lawsuits when business doesn't go as expected.

Not surprisingly, an equal percentage of CEOs strongly believed litigation reform was long overdue.

"Access to corporate information is a driving force behind investor decision making and, ultimately, efficient markets," said AMEX Chairman Richard Syron. "Because of the constant threat of shareholder suits looming over corporate America, the free flow of information is being impeded."

Seventeen percent of the 218 CEOs responding to the survey said they had incurred disclosure-related lawsuits in the previous five years. Seventy percent of those executives spent an average of one day a week attending to such suits. Over half of them opted to settle out of court.

A study by the National Economic Research Association (NERA) estimated the costs of responding to such suits. In 1990, the average cost of each shareholder suit was $5.8 million. Three years later, it was $7.36 million. Plaintiffs recovered an average of $.06 for each dollar sought. Their attorneys reaped five times that amount, according to the NERA survey.