IDEAS home Printed from https://ideas.repec.org/a/taf/jriskr/v10y2007i8p1007-1025.html
   My bibliography  Save this article

The Role of Risk in Corporate Value: A Case Study of the ABB Asbestos Litigation

Author

Listed:
  • Kristian Kallenberg

Abstract

The need for fair risk communication has emerged as a result of a more global and more flexible economy as well as of a media dominated world. Proper risk management and risk communication is therefore crucial today. The paper discusses the need for open and direct communication with the public in order to establish trust and to maintain market value. The case discussed is that of ABB (Asea Brown Boveri) asbestos litigation and the dramatic consequences it had for the company. During 2001 and 2002, the ABB share price fell by roughly 90 percent. The present study indicates that more than 50 percent of the fall was related to asbestos reporting by the media and ABB, primarily during the second half of 2002. The need for further understanding of and procedures for dealing with risks and risk communication in a business context is stressed. The outcome for ABB could have been different if more precise and defined ways of working with and communicating risks had been employed. Due to the asbestos crisis and the dramatic fall in ABB share price, ABB has implemented more structured operational risk management tools and displays a more outspoken awareness of environmental and social risk factors. This new strategy has emerged mainly as a result of an increased work with sustainability issues and a shift from a consensual/technocratic risk approach to a more deliberative mode of risk management.

Suggested Citation

  • Kristian Kallenberg, 2007. "The Role of Risk in Corporate Value: A Case Study of the ABB Asbestos Litigation," Journal of Risk Research, Taylor & Francis Journals, vol. 10(8), pages 1007-1025, December.
    • Handle: RePEc:taf:jriskr:v:10:y:2007:i:8:p:1007-1025
    DOI: 10.1080/13669870701497795
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13669870701497795
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13669870701497795?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michelle J. White, 2004. "Asbestos and the Future of Mass Torts," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 183-204, Spring.
    2. Michelle J. White, 2004. "Asbestos and the Future of Mass Torts," NBER Working Papers 10308, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sovan Mitra & Andreas Karathanasopoulos, 2019. "Firm Value and the Impact of Operational Management," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 26(1), pages 61-85, March.
    2. Brielle Lillywhite & Gregor Wolbring, 2022. "Risk Narrative of Emergency and Disaster Management, Preparedness, and Planning (EDMPP): The Importance of the ‘Social’," Sustainability, MDPI, vol. 15(1), pages 1-36, December.
    3. Zhuwei Li & Yucheng Wang & Lijie Yu & Hui An, 2016. "Relationship between initiative risk management and firm value: evidence from Chinese financial listed companies," Applied Economics, Taylor & Francis Journals, vol. 48(8), pages 658-668, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ran An & Ying Zhou & Rongzhao Zhang, 2024. "The development, shortcomings and future improvement of punitive damages for environmental torts in China—a reflection and comparative research," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    2. Alex Coad & Gianluca Biggi & Elisa Giuliani, 2021. "Asbestos, leaded petrol, and other aberrations: comparing countries’ regulatory responses to disapproved products and technologies," Industry and Innovation, Taylor & Francis Journals, vol. 28(2), pages 201-233, February.
    3. Ramello, Giovanni B., 2012. "Aggregate litigation and regulatory innovation: Another view of judicial efficiency," International Review of Law and Economics, Elsevier, vol. 32(1), pages 63-71.
    4. Landeo, Claudia M., 2009. "Cognitive coherence and tort reform," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 898-912, December.
    5. Landeo, Claudia M., 2009. "Tort Reform, Disputes and Belief Formation," MPRA Paper 13453, University Library of Munich, Germany.
    6. Eric Helland & Jonathan Klick & Alexander Tabarrok, 2005. "Data Watch: Tort-uring the Data," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 207-220, Spring.
    7. Taillard, Jérôme P., 2013. "The disciplinary effects of non-debt liabilities: Evidence from asbestos litigation," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 267-293.
    8. Paul Rubin, 2005. "Public choice and tort reform," Public Choice, Springer, vol. 124(1), pages 223-236, July.
    9. Taillard, Jerome Ph. A., 2008. "Thriving in the Midst of Financial Distress? An Analysis of Firms Exposed to Abestos Litigation," Working Paper Series 2008-12, Ohio State University, Charles A. Dice Center for Research in Financial Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jriskr:v:10:y:2007:i:8:p:1007-1025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RJRR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.