Market Reaction to Environmental Disasters

  • Виктория Артуровна Черкасова НИУ ВШЭ
  • Дарья Захарова Paris 1 Panthéon-Sorbonne University


Despite the fact that environmental issues are coming to the fore today, the market reaction to environmental disasters is not strong enough. This article examines the impact of a number of major industrial disasters on the companies’ stock performance, depending on financial health of the companies involved in an accident. We assessed the impact of financial indicators such as: financial leverage, profitability, balance value per share, capital expenditures, market capitalization and revenue on the amplitude of cumulative average abnormal returns (CAAR). The sample consists of 32 companies from
the oil, chemical, mining and energy industries of developed countries involved in 80 major accidents between 2000 and 2020. The majority of disasters occurred in North America (47.5%) and in Europe (26.3%). Using the event study method to assess shareholders’ reaction and regression analysis, we proved that the financial leverage, profitability and book value per share has a positive impact on the amplitude of CAAR, while the ratio of capital expenditures to revenue has a negative impact on cumulative returns. The results showed that market capitalization and revenue growth do not affect the dynamics of stock prices after industrial disasters. In general, our study shows that the impact of all financial indicators on CAAR
is small (<1%). That is, despite the mandatory publication of climate risk reports, investors did not actively sell shares of companies guilty of industrial disasters. The results of the study are useful in several areas. On the one hand, by forming a diversified investment portfolio, investors taking into account the type of companies that are more sensitive to disasters. On the other hand, knowing such a market reaction, the state should provide financial players with strict rules and penalties for companies responsible for accidents.


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Как цитировать
ЧеркасоваВ. А. и ЗахароваД. (2024) «Market Reaction to Environmental Disasters», Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438, 18(1), сс. 37-48. doi: 10.17323/j.jcfr.2073-0438.18.1.2024.37-48.
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