Economic impact of hazardous-wastes mismanagement lawsuits on stockholders' returns: a capital market approach
This study uses a capital-market approach to measure the impact of hazardous-waste mismanagement lawsuits on the value of the firm. Lawsuits are either to recoup the cleanup costs of mismanaged sites or to receive compensation for personal damages. The two states in the litigation process examined for capital-market reactions were the initial filing of the lawsuit (87 cases) and the court decision/settlement (62 cases). The Cumulative Prediction Error (CPE) technique is used to measure the size and statistical significance of the abnormal returns, using daily stock return data from CRSP database. The null hypothesis is that shareholders are not significantly penalized by the market for their firms involvement in a hazardous-wastes mismanagement lawsuit. A cross-sectional model is developed using multiple regression to explain the variation in the abnormal returns. The results of the study indicate that, on average, shareholders suffer losses of about 1.1% on the filing of a lawsuit. These losses are statistically significant at conventional levels, suggesting that shareholders are penalized for their firms hazardous-waste mismanagement. Further analysis indicates that shareholders suffer an average decrease in the value of the firm of about $30.166 million per lawsuit.
- Research Organization:
- Louisiana Tech Univ., Ruston (USA)
- OSTI ID:
- 7226166
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
290200 -- Energy Planning & Policy-- Economics & Sociology
290300* -- Energy Planning & Policy-- Environment
Health
& Safety
ECONOMIC IMPACT
HAZARDOUS MATERIALS
LAWSUITS
MANAGEMENT
MATERIALS
MATHEMATICS
OWNERSHIP
POLLUTION SOURCES
REGRESSION ANALYSIS
REMEDIAL ACTION
STATISTICS
WASTE MANAGEMENT