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Economic consequences of the German environmental liability act: Capital market response for the chemical industry

  • Bartsch, Elga
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    The Environmental Liability Act (Umwelthaftungsgesetz) enacted January 1, 1991 is claimed to have substantially tightened the environmental liability regime in Germany. The economic consequences of the amendment of the German environmental liability legislation initiated by the Sandoz accident are investigated for a portfolio of firms in the chemical industry. By means of an event study it is determined whether the UmweltHG has led to a revision of expectations regarding the profitability of the German chemical industry. If sizeable precautionary pollution control measures and liability payments were to be induced by the UmweltHG, both the returns and the risk attached to investing in the chemical industry should be negatively affected. The findings of this study, however, do not indicate that the German Environmental Liability Act induced such a negative impact on the chemical industry.

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    File URL: http://econstor.eu/bitstream/10419/46807/1/25802903X.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 822.

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    Date of creation: 1997
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    Handle: RePEc:kie:kieliw:822
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    1. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    2. 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.
    3. Viscusi, W Kip & Hersch, Joni, 1990. "The Market Response to Product Safety Litigation," Journal of Regulatory Economics, Springer, vol. 2(3), pages 215-30, September.
    4. Maloney, Michael T & McCormick, Robert E, 1982. "A Positive Theory of Environmental Quality Regulation," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 99-123, April.
    5. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-10, November.
    6. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    7. Breusch, T S, 1978. "Testing for Autocorrelation in Dynamic Linear Models," Australian Economic Papers, Wiley Blackwell, vol. 17(31), pages 334-55, December.
    8. Coutts, J. Andrew & Mills, Terence C. & Roberts, Jennifer, 1996. "The market model and the event study method: A rejoinder," International Review of Financial Analysis, Elsevier, vol. 5(1), pages 83-86.
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