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Implications of the British petroleum oil spill disaster for its industry peers - evidence from the market reaction and earnings quality

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  • Yun-Sheng Hsu
  • Cathy Zishang Liu
  • Yan-Jie Yang
  • Yan-Yu Chou

Abstract

As one of the worst environmental catastrophes in US history, the British Petroleum (BP) Deepwater Horizon explosion and oil spill have profound implications for the oil and gas industry. This study examines the stock market reaction and earnings quality of BP's peers in response to the imminence of regulatory threats. Our empirical evidence indicates that a significantly negative intra-industry reaction occurred. In addition, petroleum companies with more extensive pre-disaster environmental disclosures experienced a less negative reaction. Finally, our analysis finds that petroleum companies tended to depress earnings via discretionary accruals post the BP oil spill. Our study is motivated by mounting attention to the increase in environmental risks and the need for enhancement in environmental accounting reporting requirements (The Securities and Exchange Commission 2010).

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  • Yun-Sheng Hsu & Cathy Zishang Liu & Yan-Jie Yang & Yan-Yu Chou, 2013. "Implications of the British petroleum oil spill disaster for its industry peers - evidence from the market reaction and earnings quality," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 20(3), pages 281-296, September.
    • Handle: RePEc:taf:raaexx:v:20:y:2013:i:3:p:281-296
    DOI: 10.1080/16081625.2012.739963
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    Cited by:

    1. Monika Kansal & Nava Subramaniam & Shekar Babu & Suresh Mony, 2020. "CSR in Government-Owned Enterprises in India: A Principal–Agent Perspective," CSR, Sustainability, Ethics & Governance, in: Bodo B. Schlegelmilch & Ilona Szőcs (ed.), Rethinking Business Responsibility in a Global Context, pages 219-236, Springer.
    2. Elisa Navarra, 2022. "Stock Market Response to Firms’ Misconduct," Working Papers ECARES 2022-40, ULB -- Universite Libre de Bruxelles.
    3. Lacina, Michael & Pan, Shanshan & Garner, Steve, 2024. "The BP oil spill and income classification shifting of oil and gas companies," Advances in accounting, Elsevier, vol. 65(C).

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