EPA enforcement, firm response strategies, and stockholder wealth: an empirical examination

The impact of Environmental Protection Agency penalties on financial performance

“…Some studies in the economics literature indicated that there is little impact on stock market performance when fines are announced (e.g., Badrinath & Bolster, ; Laplante & Lanoie, ). However, Bosh et al () in a later study found a significant impact on stock market performance looking at abnormal returns.…”

Effects of ownership and financial performance on corporate environmental performance

“…Gottsman and Kessler (1998) divide the companies in the S & P 500 into three sub-samples based on four measures of environmental performance and find no statistically significant differences in financial returns among the three categories of environmental performers. Bosch et al (1998) consider the effect of federal environmental enforcement, which represents one measure of environmental performance, on stockholder wealth. These authors show that the stock market reacts negatively upon learning that a given firm has been targeted for enforcement.…”

Prescriptive measures for environmental performance: emission standards, overcompliance, and monitoring

“…Empirical studies that attempt to link financial performance with environmental performance focus in large part on correlation and regression analysis (Al-Tuwaijri et al 2004;Mamingi et al 2006). Event studies measure the impact of violations or good environmental performance on a firm's financial measures (Hamilton 1995;Klassen and McLaughlin 1996;Laplante and Lanoie 1994;Bosch et al 1998). There is evidence that announcements or disclosure of violations result in negative security price movements across all industries (Shane and Spicer 1983;Cohen 1997, 2001;Gupta and Goldar 2005;Dasgupta et al 2001Dasgupta et al , 2006Deák et al 2014;Xu et al 2014).…”

“…Violations often lead to penalties and, like lawsuits, regulatory penalties cause a fall in a firm's value(Hughes 2000). Challenging the lawsuits or contesting regulatory penalties further erodes the value of a firm(Bosch et al 1998). Prescriptive measures for environmental performance…”