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The Role of Market Forces in EPA Enforcement Activity

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  • Badrinath, S G
  • Bolster, Paul J
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    Abstract

    As corporate concern regarding environmental issues grows, recent studies have debated the stock market's role as an enforcer of environmental regulation. We examine stock market reactions to EPA judicial actions on a sample of publicly traded firms from 1972-91. Specifically, we find that (a) there is a significant decline of 0.43% in violator firm value during the week of settlement; (b) the market penalty is unrelated to fine size, (c) more pronounced for citations under the Clean Air Act, (d) for repeat violators, and (e) for more recent EPA actions. These stock market reactions appear to reinforce the intent of EPA enforcement efforts. Copyright 1996 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 10 (1996)
    Issue (Month): 2 (September)
    Pages: 165-81

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    Handle: RePEc:kap:regeco:v:10:y:1996:i:2:p:165-81

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    Cited by:
    1. Bernard Sinclair-Desgagné, 2000. "Environmental Risk Management and the Business Firm," CIRANO Working Papers 2000s-23, CIRANO.
    2. Graafland, J.J. & Smid, H., 2004. "Reputation, corporate social responsibility and market regulation," MPRA Paper 20772, University Library of Munich, Germany.
    3. Arthur Caplan, 2002. "Reputation and the Control of Pollution," Working Papers 2002-24, Utah State University, Department of Economics.
    4. Blackman, Allen & Afsah, Shakeb & Ratunanda, Damayanti, 2000. "How Do Public Disclosure Pollution Control Programs Work? Evidence from Indonesia," Discussion Papers, Resources For the Future dp-00-44, Resources For the Future.
    5. Matthew A. Cole & Robert J R Elliott & Toshihiro Okubo & Ying Zhou, 2012. "The Carbon Dioxide Emissions of Firms: A Spatial Analysis," Keio/Kyoto Joint Global COE Discussion Paper Series, Keio/Kyoto Joint Global COE Program 2012-003, Keio/Kyoto Joint Global COE Program.
    6. Francisco J. André & Abderrahmane Sokri & Georges Zaccour, 2009. "Public Disclosure Programs vs. Traditional Approaches for Environmental Regulation: Green Goodwill and the Policies of the Firm," Working Papers 09.02, Universidad Pablo de Olavide, Department of Economics.
    7. Siegel, Jordan, 2005. "Can foreign firms bond themselves effectively by renting U.S. securities laws?," Journal of Financial Economics, Elsevier, Elsevier, vol. 75(2), pages 319-359, February.
    8. Hiriart, Yolande, 2004. "L'utilisation du droit pénal en matière environnementale," IDEI Working Papers 326, Institut d'Économie Industrielle (IDEI), Toulouse.
    9. Foulon, Jerome & Lanoie, Paul & Laplante, Benoit, 2000. "Incentives for pollution control - regulation and public disclosure," Policy Research Working Paper Series 2291, The World Bank.
    10. Sarah L. Stafford, 2005. "Can Consumers Enforce Environmental Regulations? The Role of the Market in Hazardous Waste Compliance," Working Papers, Department of Economics, College of William and Mary 19, Department of Economics, College of William and Mary.
    11. Sarah Stafford, 2007. "Can consumers enforce environmental regulations? The role of the market in hazardous waste compliance," Journal of Regulatory Economics, Springer, Springer, vol. 31(1), pages 83-107, February.
    12. Tom Tietenberg, 1998. "Disclosure Strategies for Pollution Control," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 11(3), pages 587-602, April.
    13. Foulon, Jerome & Lanoie, Paul & Laplante, Benoit, 2002. "Incentives for Pollution Control: Regulation or Information?," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 169-187, July.
    14. Capelle-Blancard, Gunther & Laguna, Marie-Aude, 2010. "How does the stock market respond to chemical disasters?," Journal of Environmental Economics and Management, Elsevier, vol. 59(2), pages 192-205, March.
    15. Heyes, Anthony & Kapur, Sandeep, 2012. "Community pressure for green behavior," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 427-441.
    16. Mehar, Ayub, 2008. "National trade associations, economic development and globalization," MPRA Paper 18590, University Library of Munich, Germany, revised 17 Sep 2008.
    17. Heyes, Anthony, 2002. "A Theory of Filtered Enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 34-46, January.

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