This study measures the impact afthe U.S. Supreme Court's 2008 ruling Stoneridge Investment Partners vs. Scientific-Atlanta on the cumulative abnormal returns and changes in bid-ask spread of firms in litigation-prone industries (computer, electronic, pharmaceuticallbiotech, and retail industries). Although we find, in general, positive CARs around the event, we posit and find that the conditional probability that a firm will commit an accounting misstatement affects both CAR and bid-ask spread The results show that firms with a higher probability of committing financial misstatements experience lower returns around the court's ruling. That is, the ruling increases information asymmetry and uncertainty, and thus costs increase for firms that are more likely to commit financial misstatements, as reflected in a widening of the bid-ask spread