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Environmental incidents and firm value-international evidence using a multi-factor event study framework

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  • Tommy Lundgren
  • Rickard Olsson

Abstract

Event study methodology is used to analyse whether bad news in the form of Environmental (EV) incidents affect firm value negatively. An international sample of firms with EV incidents is studied. It is found that EV incidents are generally associated with the loss of value. For European firms, the loss is statistically significant and the magnitude of the abnormal returns should be of economic significance to corporations and investors. The results are not sensitive to multiple variations in methodology, including the use of international versions of the market model as well as of multi-factor models of the Fama-French type. Results are also robust to different parametric and nonparametric test statistics.

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  • Tommy Lundgren & Rickard Olsson, 2010. "Environmental incidents and firm value-international evidence using a multi-factor event study framework," Applied Financial Economics, Taylor & Francis Journals, vol. 20(16), pages 1293-1307.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:16:p:1293-1307
    DOI: 10.1080/09603107.2010.482516
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    Cited by:

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    2. Yan Jiang & Le Luo, 2018. "Market reactions to environmental policies: Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(5), pages 889-903, September.
    3. Lin, Boqiang & Pan, Ting, 2024. "Whether green credit is effecitve: a study based on stock market," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 261-274.
    4. Wolfgang Breuer & Moritz Felde & Bertram I. Steininger, 2017. "The Financial Impact of Firm Withdrawals from “State Sponsor of Terrorism” Countries," Journal of Business Ethics, Springer, vol. 144(3), pages 533-547, September.
    5. Gunther Capelle-Blancard & Adrien Desroziers & Bert Scholtens, 2021. "Shareholders and the environment: a review of four decades of academic research," Post-Print hal-03526647, HAL.
    6. Tong Fang & Zhi Su & Libo Yin, 2021. "Does the green inspiration effect matter for stock returns? Evidence from the Chinese stock market," Empirical Economics, Springer, vol. 60(5), pages 2155-2176, May.
    7. Peter Kort & Maria Lavrutich & Cláudia Nunes & Carlos Oliveira, 2022. "Preventing Environmental Disasters in Investment under Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(1), pages 199-220, September.
    8. Ivana Mateska & Christian Busse & Andrew P. Kach & Stephan M. Wagner, 2023. "Sustainability‐related transgressions in global supply chains: When do legitimacy spillovers hurt buying firms the most?," Journal of Supply Chain Management, Institute for Supply Management, vol. 59(4), pages 42-78, October.
    9. Daniel Arand & Alexander G. Kerl, 2015. "Sell†Side Analyst Research and Reported Conflicts of Interest," European Financial Management, European Financial Management Association, vol. 21(1), pages 20-51, January.

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