The Costs of Conflict Resolution and Financial Distress: Evidence from the Texaco-Pennzoil Litigation

This article demonstrates that the dispute between Texaco and Pennzoil over the Getty Oil reduced the combined wealth of the claimants on the two companies by over $3 billion. During the course of the litigation, Pennzoil's shareholders gained only one-sixth much as Texaco's shareholders lost. When the litigation was settled, about two-thirds of loss in wealth was regained. These fluctuations in value exceed most estimates of the costs of carrying on the litigation, and may reflect the disruption in the operations of caused by the dispute.