The BP Oil Spill: Shareholder Wealth Effects and Environmental Disclosures

Forthcoming, Journal of Business Finance and Accounting

57 Pages Posted: 26 Sep 2011 Last revised: 22 Mar 2017

See all articles by Frank Heflin

Frank Heflin

University of Georgia - J.M. Tull School of Accounting

Dana Wallace

University of Central Florida - School of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: March 21, 2017

Abstract

We use the BP, PLC oil spill to provide new evidence regarding the consequences of and motivations for environmental disclosures. We find that among oil and gas firms drilling in U.S. waters, those with greater environmental disclosure suffered smaller negative shareholder wealth effects following the spill. This suggests that shareholders believed firms with more environmental disclosures were better prepared to address future environmental regulations and less likely to experience similar environmental incidents. We also document an increase in environmental disclosure, specifically disclosures of disaster readiness plans, in the year following the spill. Firms with poorer past environmental performance were more likely to increase disaster readiness plan disclosures. The increased disclosure by the poor pre-spill environmental performers is not entirely window dressing, as their post-spill environmental performance improved. The totality of our evidence is most consistent with the voluntary disclosure theory of environmental disclosure.

Keywords: Environmental disclosure, Stock returns

JEL Classification: M41, K32, G10

Suggested Citation

Heflin, Frank and Wallace, Dana, The BP Oil Spill: Shareholder Wealth Effects and Environmental Disclosures (March 21, 2017). Forthcoming, Journal of Business Finance and Accounting. Available at SSRN: https://ssrn.com/abstract=1933531 or http://dx.doi.org/10.2139/ssrn.1933531

Frank Heflin (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706-542-1616 (Phone)
706-542-3630 (Fax)

Dana Wallace

University of Central Florida - School of Accounting ( email )

Kenneth G. Dixon School of Accounting
P.O. Box 161400
Orlando, FL 32316-1400
United States

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