How Does the Stock Market Respond to Chemical Disasters?

42 Pages Posted: 19 Sep 2009

See all articles by Gunther Capelle-Blancard

Gunther Capelle-Blancard

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES); PSB Paris School of Business

Marie-Aude Laguna

Université Paris Dauphine - DRM-CEREG

Date Written: June 2009

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.

JEL Classification: G14, Q27, Q51

Suggested Citation

Capelle-Blancard, Gunther and Laguna, Marie-Aude, How Does the Stock Market Respond to Chemical Disasters? (June 2009). Journal of Environmental Economics and Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1475629

Gunther Capelle-Blancard

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

PSB Paris School of Business ( email )

59 rue Nationale
Paris, 75013
France

Marie-Aude Laguna (Contact Author)

Université Paris Dauphine - DRM-CEREG ( email )

place du Maréchal de Lattre de Tassigny
cedex 16
Paris, 75775
France

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