The BP Oil Spill: Shareholder Wealth Effects and Environmental Disclosures

38 Pages Posted: 25 Apr 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/April 2017

Abstract

We use the BP 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 US 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, environmental performance, stock returns

Suggested Citation

Heflin, Frank and Wallace, Dana, The BP Oil Spill: Shareholder Wealth Effects and Environmental Disclosures (March/April 2017). Journal of Business Finance & Accounting, Vol. 44, Issue 3-4, pp. 337-374, 2017. Available at SSRN: https://ssrn.com/abstract=2957930 or http://dx.doi.org/10.1111/jbfa.12244

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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