Abstract

http://ssrn.com/abstract=747824
 
 

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The Reputational Penalties for Environmental Violations: Empirical Evidence


Jonathan M. Karpoff


University of Washington - Michael G. Foster School of Business

John R. Lott Jr.


Crime Prevention Research Center

Eric W. Wehrly


Western Washington Univ. - College of Business and Economics


Journal of Law and Economics, Forthcoming

Abstract:     
This paper examines the sizes of the fines, damage awards, remediation costs, and market value losses imposed on companies that violate environmental regulations. Firms violating environmental laws suffer statistically significant losses in the market value of firm equity. The losses, however, are of similar magnitudes to the legal penalties imposed; and in the cross section, the market value loss is related to the size of the legal penalty. Thus, environmental violations are disciplined largely through legal and regulatory penalties, not through reputational penalties.

Number of Pages in PDF File: 35

Keywords: Environmental violations, corporate misconduct, legal penalties, reputation costs

JEL Classification: K32, K42, Q58


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Date posted: August 16, 2005  

Suggested Citation

Karpoff, Jonathan M. and Lott, John R. and Wehrly, Eric W., The Reputational Penalties for Environmental Violations: Empirical Evidence. Journal of Law and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=747824

Contact Information

Jonathan M. Karpoff (Contact Author)
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)
John R. Lott Jr.
Crime Prevention Research Center ( email )
DC
United States
Eric W. Wehrly
Western Washington Univ. - College of Business and Economics ( email )
United States
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