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How Does the Stock Market Respond to Chemical Disasters?

Author

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  • Marie-Aude Laguna

    () (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Gunther Capelle-Blancard

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université 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.

Suggested Citation

  • Marie-Aude Laguna & Gunther Capelle-Blancard, 2010. "How Does the Stock Market Respond to Chemical Disasters?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00637961, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00637961
    DOI: 10.1016/j.jeem.2009.11.002
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00637961
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • 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

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