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How Does the Stock Market Respond to Chemical Disasters?Gunther Capelle-BlancardUniversité Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES); Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) Marie-Aude LagunaUniversité Paris-Dauphine - DRM-CEREG June 2009 Journal of Environmental Economics and Management, Forthcoming Abstract: In this paper, we examine the stock market reaction to industrial disasters. We consider an original sample of 64 explosions in chemical plants and refineries worldwide over the period 1990-2005. A quarter of the accidents resulted in a toxic release, and half of them caused at least one death or serious injury. On average, petrochemical firms in our sample experience a drop in their market value of 1.3% over the two days immediately following the disaster. Using multivariate analysis, we show that this loss is significantly related to the seriousness of the accident as measured by the number of casualties and by chemical pollution: each casualty corresponds to a loss of $164 million and a toxic release to a loss of $1 billion.
Number of Pages in PDF File: 42 JEL Classification: G14, Q27, Q51 Accepted Paper SeriesDate posted: September 19, 2009Suggested CitationContact Information
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