Advanced Search
MyIDEAS: Login to save this paper or follow this series

How Does the Stock Market Respond to Chemical Disasters?

Contents:

Author Info

  • Marie-Aude Laguna

    ()
    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)

  • Gunther Capelle-Blancard

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

In this paper, we examine the stock market reaction to industrial disasters. We consider an original sample of 64 explosions in chemical plants and refineries worldwide over the period 1990-2005. A quarter of the accidents resulted in a toxic release, and half of them caused at least one death or serious injury. On average, petrochemical firms in our sample experience a drop in their market value of 1.3% over the two days immediately following the disaster. Using multivariate analysis, we show that this loss is significantly related to the seriousness of the accident as measured by the number of casualties and by chemical pollution: each casualty corresponds to a loss of $164 million and a toxic release to a loss of $1 billion.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://halshs.archives-ouvertes.fr/docs/00/63/79/61/PDF/JEEM_2009.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00637961.

as in new window
Length:
Date of creation: Mar 2010
Date of revision:
Publication status: Published, Journal of Environmental Economics and Management, 2010, 59, 2, 192-205
Handle: RePEc:hal:cesptp:halshs-00637961

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00637961
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Technological risk; Event study; Environmental liability; Disclosure; Insurance;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999. "Investor Protection and Corporate Valuation," NBER Working Papers 7403, National Bureau of Economic Research, Inc.
  2. Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
  3. Spudeck, Raymond E. & Moyer, R. Charles, 1989. "A note on the stock market's reaction to the accident at three mile island," Journal of Economics and Business, Elsevier, Elsevier, vol. 41(3), pages 235-240, August.
  4. Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, American Economic Association, vol. 78(5), pages 913-35, December.
  5. Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, Elsevier, vol. 49(3), pages 283-306, September.
  6. Badrinath, S G & Bolster, Paul J, 1996. "The Role of Market Forces in EPA Enforcement Activity," Journal of Regulatory Economics, Springer, Springer, vol. 10(2), pages 165-81, September.
  7. Karpoff, Jonathan M & Lott, John R, Jr & Wehrly, Eric W, 2005. "The Reputational Penalties for Environmental Violations: Empirical Evidence," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 48(2), pages 653-75, October.
  8. X. Frank Zhang, 2006. "Information Uncertainty and Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 61(1), pages 105-137, 02.
  9. Richard K. Harper & Stephen C. Adams, 1996. "Cercla And Deep Pockets: Market Response To The Superfund Program," Contemporary Economic Policy, Western Economic Association International, Western Economic Association International, vol. 14(1), pages 107-115, 01.
  10. Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, INFORMS, vol. 42(8), pages 1199-1214, August.
  11. Gupta, Shreekant & Goldar, Bishwanath, 2005. "Do stock markets penalize environment-unfriendly behaviour? Evidence from India," Ecological Economics, Elsevier, Elsevier, vol. 52(1), pages 81-95, January.
  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. Bowen, Robert M. & Castanias, Richard P. & Daley, Lane A., 1983. "Intra-Industry Effects of the Accident at Three Mile Island," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 18(01), pages 87-111, March.
  14. Khanna, Madhu & Quimio, Wilma Rose H. & Bojilova, Dora, 1998. "Toxics Release Information: A Policy Tool for Environmental Protection," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 243-266, November.
  15. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
  16. Mark Cohen & V. Santhakumar, 2007. "Information Disclosure as Environmental Regulation: A Theoretical Analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 37(3), pages 599-620, July.
  17. Fields, M. Andrew & Janjigian, Vahan, 1989. "The effect of Chernobyl on electric-utility stock prices," Journal of Business Research, Elsevier, Elsevier, vol. 18(1), pages 81-87, January.
  18. Dasgupta, Susmita & Laplante, Benoit & Mamingi, Nlandu, 2001. "Pollution and Capital Markets in Developing Countries," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 310-335, November.
  19. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(1), pages 13-39, March.
  20. Dasgupta, Susmita & Hong, Jong Ho & Laplante, Benoit & Mamingi, Nlandu, 2006. "Disclosure of environmental violations and stock market in the Republic of Korea," Ecological Economics, Elsevier, Elsevier, vol. 58(4), pages 759-777, July.
  21. Hill, Joanne & Schneeweis, Thomas, 1983. " The Effect of Three Mile Island on Electric Utility Stock Prices: A Note," Journal of Finance, American Finance Association, American Finance Association, vol. 38(4), pages 1285-92, September.
  22. Salinger, Michael, 1992. "Value Event Studies," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 671-77, November.
  23. Blacconiere, Walter G. & Patten, Dennis M., 1994. "Environmental disclosures, regulatory costs, and changes in firm value," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 18(3), pages 357-377, November.
  24. Barrett, W Brian & Heuson, Andrea J & Kolb, Robert W, 1986. " The Effect of Three Mile Island on Utility Bond Risk Premia: A Note," Journal of Finance, American Finance Association, American Finance Association, vol. 41(1), pages 255-61, March.
  25. Herbst, Anthony F. & Marshall, John F. & Wingender, John, 1996. "An analysis of the stock market's response to the Exxon Valdez disaster," Global Finance Journal, Elsevier, vol. 7(1), pages 101-114.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. X. Xu & S. Zeng & C. Tam, 2012. "Stock Market’s Reaction to Disclosure of Environmental Violations: Evidence from China," Journal of Business Ethics, Springer, Springer, vol. 107(2), pages 227-237, May.
  2. Christos Kollias & Stephanos Papadamou & Costas Siriopoulos, 2013. "European Markets’ Reactions to Exogenous Shocks: A High Frequency Data Analysis of the 2005 London Bombings," International Journal of Financial Studies, MDPI, Open Access Journal, MDPI, Open Access Journal, vol. 1(4), pages 154-167, November.
  3. Ulrich Oberndorfer & Marcus Wagner & Andreas Ziegler, 2011. "Does the Stock Market Value the Inclusion in a Sustainability Stock Index? An Event Study Analysis for German Firms," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201130, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Christos Kollias & Stephanos Papadamou & Vangelis Arvanitis, 2013. "Symposium - Does Terrorism Affect the Stock-Bond Covariance? Evidence from European Countries," Southern Economic Journal, Southern Economic Association, Southern Economic Association, vol. 79(4), pages 832-848, April.
  5. Fujii, Hidemichi & Managi, Shunsuke, 2012. "Decomposition of toxic chemical substance management in three U.S. manufacturing sectors from 1991 to 2008," MPRA Paper 37550, University Library of Munich, Germany.
  6. Oberndorfer, Ulrich & Ulbricht, Dirk, 2007. "Lost in Transmission? Stock Market Impacts of the 2006 European Gas Crisis," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 07-030, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Jose Manuel Feria-Dominguez & Enrique Jimenez-Rodriguez & Ines Merino Fernandez-Galiano, 2013. "Isolating the corporate reputational risk in environmental oil spill disasters," Working Papers, Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration) 13.02, Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration).
  8. Shahbaz, Muhammad, 2011. "Does financial instability increase environmental pollution in Pakistan?," MPRA Paper 31530, University Library of Munich, Germany, revised 27 Mar 2011.
  9. Patrick Richard, 2010. "Financial market instability and CO2 emissions," Cahiers de recherche, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke 10-20, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  10. Janick Christian Mollet & Andreas Ziegler, 2012. "Is Socially Responsible Investing Really Beneficial? New Empirical Evidence for the US and European Stock Markets," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201228, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  11. Stephen Finger & Shanti Gamper-Rabindran, 2013. "Testing the effects of self-regulation on industrial accidents," Journal of Regulatory Economics, Springer, Springer, vol. 43(2), pages 115-146, April.
  12. Murguia, Juan Manuel & Lence, Sergio H., 2012. "Investors’ reaction to environmental performance: A global perspective of the Newsweek’s “Green Rankingsâ€," Staff General Research Papers, Iowa State University, Department of Economics 35664, Iowa State University, Department of Economics.
  13. Ito, Yutaka & Managi, Shunsuke & Matsuda, Akimi, 2012. "Performances of Socially Responsible Investment and Environmentally Friendly Funds," MPRA Paper 40654, University Library of Munich, Germany.
  14. Laguna, Marie-Aude, 2010. "Unexpected Media Coverage and Stock Market Outcomes : Evidence from Chemical Disasters," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/5891, Paris Dauphine University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00637961. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.