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