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Is There A Green Link A Panel Data Value Event Study Of The Relationship Between Capital Markets And Toxic Releases

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  • Amarnath Ananthanarayanan

    ()
    (Rutgers University)

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    Abstract

    This paper attempts to look at the effectiveness of public provision of pollution information in providing incentives for firms to control pollution. This is achieved by examining the effect of release of pollution information on the market value of firms. The paper conducts a value event study using the U.S Environmental Protection Agency's Toxic Release Inventory Program as the basis for its analysis. We conclude that there are significant negative abnormal returns on the day of the release of the pollution information for all the seven releases put together. But, there are no significant negative abnormal returns for each of the seven releases when we incorporate the contemporaneous correlation of the returns and inter-temporal correlation of the estimated abnormal returns. In addition, this negative effect peters away as the length of the event period is extended to include the four days after the release of the information as well.

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    Bibliographic Info

    Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199818.

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    Date of creation: 17 Sep 1998
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    Handle: RePEc:rut:rutres:199818

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    Related research

    Keywords: Environment Pollution; Event Study; Panel Data; Seemingly Unrelated Regressions (SUR); Toxic Release Inventory (TRI);

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    References

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    1. 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.
    2. Kennedy, P.W. & Laplante, B. & Maxwell, J., 1993. "Pollution Policy: The Role for Publicly Provided Information," Papers 9301, Laval - Recherche en Energie.
    3. Paul Lanoie & Benoit Laplante & Maité Roy, 1997. "Can Capital Markets Create Incentives for Pollution Control?," CIRANO Working Papers 97s-05, CIRANO.
    4. Jaffe Adam B. & Stavins Robert N., 1995. "Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S43-S63, November.
    5. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Salinger, Michael, 1992. "Standard Errors in Event Studies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(01), pages 39-53, March.
    7. 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.
    8. Ayres, Robert U & Kneese, Allen V, 1969. "Production , Consumption, and Externalities," American Economic Review, American Economic Association, vol. 59(3), pages 282-97, June.
    9. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    10. Lanoie, Paul & Laplante, Benoit & Roy, Maite, 1997. "Can capital markets create incentives for pollution control?," Policy Research Working Paper Series 1753, The World Bank.
    11. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    12. Salkever, David S., 1976. "The use of dummy variables to compute predictions, prediction errors, and confidence intervals," Journal of Econometrics, Elsevier, vol. 4(4), pages 393-397, November.
    13. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    14. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
    15. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    16. Kennedy Peter W. & Laplante Benoit & Maxwell John, 1994. "Pollution Policy: the Role for Publicly Provided Information," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 31-43, January.
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    Cited by:
    1. Stavins, Robert, 2003. "Market-Based Environmental Policies: What Can We Learn from U.S. Experience and Related Research?," Working Paper Series rwp03-031, Harvard University, John F. Kennedy School of Government.
    2. Stavins, Robert, 2001. "Experience with Market-Based Environmental Policy Instruments," Discussion Papers dp-01-58, Resources For the Future.
    3. Stavins, Robert, 2001. "Lessons From the American Experiment With Market-Based Environmental Policies," Discussion Papers dp-01-53, Resources For the Future.

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