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The role of aviation laws and legal liability in aviation disasters: A financial market perspective

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  • Walker, Thomas John
  • Walker, Marcus Glenn
  • Thiengtham, Dolruedee Nuttanontra
  • Pukthuanthong, Kuntara

Abstract

Legal liability claims against airlines and airplane manufacturers following an aviation disaster are determined through a myriad of international treaties, intercarrier agreements, and federal and state laws. Which law applies in a specific situation depends on various circumstances surrounding the accident. As a result, pecuniary and non-pecuniary damage awards for the families of the accident victims may vary substantially from case to case. Our study examines how aviation disasters affect the short and long-term performance of US airlines and US airplane manufacturers and explores the factors that drive the performance differences. While prior research has largely focused on brand name effects and rising insurance premiums as possible determinants of stock price losses, our results suggest that the regulatory environment that applies to a given aviation accident has a significant impact on how the market reacts to its announcement. Ceteris paribus, we find that accidents that are governed by state laws which place no limit on damage claims entail particularly large stock price declines. Accidents for which federal laws or international treaties restrict claimable damages, on the other hand, are associated with smaller stock price drops.

Suggested Citation

  • Walker, Thomas John & Walker, Marcus Glenn & Thiengtham, Dolruedee Nuttanontra & Pukthuanthong, Kuntara, 2014. "The role of aviation laws and legal liability in aviation disasters: A financial market perspective," International Review of Law and Economics, Elsevier, vol. 37(C), pages 51-65.
    • Handle: RePEc:eee:irlaec:v:37:y:2014:i:c:p:51-65
    DOI: 10.1016/j.irle.2013.07.004
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    Cited by:

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    More about this item

    Keywords

    Aviation law; Information and market efficiency; Event studies;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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