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How stock market reacts to environmental disasters and judicial decisions: A case study of Mariana’s dam collapse in Brazil

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  • Assis, T.P.
  • Cordeiro, F.F.
  • Schiavon, L.C.

Abstract

This study examines the stock market reaction to one of the major environmental disasters of the world mining industry: the Mariana dam collapse in Brazil. Based on an event study, we evaluated the impact on the mining companies’ abnormal returns surrounding the disaster and also investigated whether post-event judicial decisions affected the companies. Our results show a significant negative effect around the days of the event, reporting a 5 % drop in daily returns. Regarding the legal efforts, our findings suggest the coordination time and the benefits granted by authorities as being interpreted positively, reducing market’s expectation of an agile or severe punishment following Mariana’s dam disaster.

Suggested Citation

  • Assis, T.P. & Cordeiro, F.F. & Schiavon, L.C., 2023. "How stock market reacts to environmental disasters and judicial decisions: A case study of Mariana’s dam collapse in Brazil," International Review of Law and Economics, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:irlaec:v:73:y:2023:i:c:s0144818822000618
    DOI: 10.1016/j.irle.2022.106105
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    More about this item

    Keywords

    Environmental disaster; Brazilian justice system; News; Fama-French three factor; Model; Mining industry;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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