How Does the Stock Market Respond to Chemical Disasters?
AbstractIn 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 InfoIf 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.
Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00637961.
Date of creation: Mar 2010
Date of revision:
Publication status: Published, Journal of Environmental Economics and Management, 2010, 59, 2, 192-205
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/
Technological risk; Event study; Environmental liability; Disclosure; Insurance;
Other versions of this item:
- 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.
- Capelle-Blancard, Gunther & Laguna, Marie-Aude, 2010. "How does the stock market respond to chemical disasters?," Economics Papers from University Paris Dauphine 123456789/3187, Paris Dauphine University.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
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.:
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Eugene F. Fama, .
"Market Efficiency, Long-term Returns, and Behavioral Finance,"
CRSP working papers
340, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
- Eugene F Fama, . "Market Efficiency, Long-Term Returns, and Behavioral Finance," CRSP working papers 448, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Blacconiere, Walter G. & Patten, Dennis M., 1994. "Environmental disclosures, regulatory costs, and changes in firm value," Journal of Accounting and Economics, Elsevier, vol. 18(3), pages 357-377, November.
- X. Frank Zhang, 2006. "Information Uncertainty and Stock Returns," Journal of Finance, American Finance Association, vol. 61(1), pages 105-137, 02.
- 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.
- Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, vol. 42(8), pages 1199-1214, August.
- 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.
- Salinger, Michael, 1992. "Value Event Studies," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 671-77, November.
- Badrinath, S G & Bolster, Paul J, 1996. "The Role of Market Forces in EPA Enforcement Activity," Journal of Regulatory Economics, Springer, vol. 10(2), pages 165-81, September.
- 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.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection and Corporate Valuation," Harvard Institute of Economic Research Working Papers 1882, Harvard - Institute of Economic Research.
- 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.
- 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, vol. 48(2), pages 653-75, October.
- Tom Tietenberg, 1998. "Disclosure Strategies for Pollution Control," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 587-602, April.
- Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-35, December.
- 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, vol. 41(1), pages 255-61, March.
- Hill, Joanne & Schneeweis, Thomas, 1983. " The Effect of Three Mile Island on Electric Utility Stock Prices: A Note," Journal of Finance, American Finance Association, vol. 38(4), pages 1285-92, September.
- 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, vol. 41(3), pages 235-240, August.
- 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, vol. 18(01), pages 87-111, March.
- Fields, M. Andrew & Janjigian, Vahan, 1989. "The effect of Chernobyl on electric-utility stock prices," Journal of Business Research, Elsevier, vol. 18(1), pages 81-87, January.
- Mark Cohen & V. Santhakumar, 2007. "Information Disclosure as Environmental Regulation: A Theoretical Analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(3), pages 599-620, July.
- 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.
- Richard K. Harper & Stephen C. Adams, 1996. "Cercla And Deep Pockets: Market Response To The Superfund Program," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 107-115, 01.
- Gupta, Shreekant & Goldar, Bishwanath, 2005. "Do stock markets penalize environment-unfriendly behaviour? Evidence from India," Ecological Economics, Elsevier, vol. 52(1), pages 81-95, January.
- 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, vol. 58(4), pages 759-777, July.
- Patrick Richard, 2010. "Financial market instability and CO2 emissions," Cahiers de recherche 10-20, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
- 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 201228, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Jose Manuel Feria-Dominguez & Enrique Jimenez-Rodriguez & Ines Merino Fernandez-Galiano, 2013. "Isolating the corporate reputational risk in environmental oil spill disasters," Working Papers 13.02, Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration).
- Shahbaz, Muhammad, 2010.
"Does financial instability increase environmental pollution in Pakistan?,"
31360, University Library of Munich, Germany, revised 28 Mar 2011.
- Shahbaz, Muhammad, 2011. "Does financial instability increase environmental pollution in Pakistan?," MPRA Paper 31530, University Library of Munich, Germany, revised 27 Mar 2011.
- 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.
- Y Ito & S Managi & A Matsuda, 2013.
"Performances of socially responsible investment and environmentally friendly funds,"
Journal of the Operational Research Society,
Palgrave Macmillan, vol. 64(11), pages 1583-1594, November.
- Ito, Yutaka & Managi, Shunsuke & Matsuda, Akimi, 2012. "Performances of Socially Responsible Investment and Environmentally Friendly Funds," MPRA Paper 40654, University Library of Munich, Germany.
- Ulrich Oberndorfer & Dirk Ulbricht & Janina Ketterer, 2007.
"Lost in Transmission? Stock Market Impacts of the 2006 European Gas Crisis,"
Ifo Working Paper Series
Ifo Working Paper No. 41, Ifo Institute for Economic Research at the University of Munich.
- Oberndorfer, Ulrich & Ulbricht, Dirk, 2007. "Lost in Transmission? Stock Market Impacts of the 2006 European Gas Crisis," ZEW Discussion Papers 07-030, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Murguia, Juan Manuel & Lence, Sergio H., 2012. "Investorsâ€™ reaction to environmental performance: A global perspective of the Newsweekâ€™s â€œGreen Rankingsâ€," Staff General Research Papers 35664, Iowa State University, Department of Economics.
- 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, vol. 1(4), pages 154-167, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.