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Reputational penalties for environmental violations: A pure and scientific replication study*

* This paper is a replication of an original study

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  • Brady, Jacob
  • Evans, Mary F.
  • Wehrly, Eric W.

Abstract

Our pure replication of Karpoff et al. (2005) confirms their findings of negative abnormal returns and insignificant reputational penalties following the announcement of environmental violations in the last two decades of the twentieth century. A scientific replication using more recent data finds a decrease in the magnitude of negative abnormal returns but similarly insignificant reputational penalties on average. While mean legal penalties for violations are higher in the more recent period, these penalties have decreased relative to firms’ market valuations.

Suggested Citation

  • Brady, Jacob & Evans, Mary F. & Wehrly, Eric W., 2019. "Reputational penalties for environmental violations: A pure and scientific replication study," International Review of Law and Economics, Elsevier, vol. 57(C), pages 60-72.
    • Handle: RePEc:eee:irlaec:v:57:y:2019:i:c:p:60-72
    DOI: 10.1016/j.irle.2018.12.007
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    References listed on IDEAS

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    Cited by:

    1. Riku Lindqvist & Chiara Lombardini & Leila Suvantola & Markku Ollikainen, 2024. "The deterrence effect of criminal sanctions against environmental crime in Finland: an application of the rational choice model of crime," European Journal of Law and Economics, Springer, vol. 58(2), pages 175-200, October.
    2. Ruiqian Li & Ramakrishnan Ramanathan & Guanghua Xu, 2023. "The impact of penalties for environmental violations on corporate environmental responsibility," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(3), pages 1343-1363, June.
    3. Xian Gu & Iftekhar Hasan & Haitian Lu, 2023. "Institutions and Corporate Reputation: Evidence from Public Debt Markets," Journal of Business Ethics, Springer, vol. 183(1), pages 165-189, February.
    4. Pamela Campa & Lucija Muehlenbachs, 2024. "Addressing Environmental Justice through In-Kind Court Settlements," American Economic Journal: Economic Policy, American Economic Association, vol. 16(1), pages 415-446, February.
    5. Chunhua Xin & Xiaolu Hao & Lu Cheng, 2022. "Do Environmental Administrative Penalties Affect Audit Fees? Results from Multiple Econometric Models," Sustainability, MDPI, vol. 14(7), pages 1-25, April.
    6. Jingjing Zuo & Baoyin Qiu, 2023. "The impact of local gambling preferences on firm‐level environmental violations: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1175-1190, March.
    7. Mketo, Ally Rajab & Ringo, Cliford J. & Nuhu, Said & Mpambije, Chakupewa Joseph, 2022. "Enhancing community participation for environmental health improvement in rural Tanzania: Evidence from Bukombe district," Evaluation and Program Planning, Elsevier, vol. 94(C).
    8. Zhang, Hao & Tao, Lunchen & Yang, Biyun & Bian, Wenlong, 2023. "The relationship between public participation in environmental governance and corporations’ environmental violations," Finance Research Letters, Elsevier, vol. 53(C).
    9. Brice Foulon & Sylvain Marsat, 2023. "Does environmental footprint influence the resilience of firms facing environmental penalties?," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 6154-6168, December.
    10. Klerman, Daniel, 2020. "Comment on Brady, Evans & Wehrly, reputational penalties for environmental violations: A pure and scientific replication study," International Review of Law and Economics, Elsevier, vol. 63(C).

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