Dear Friends:
This article (Penalties for industrial accidents: The impact of the Deepwater Horizon accident on BP’s reputation and stock market returns) might interest you. The findings are that while the 2010 Deepwater disaster inflicted long-term reputational damage on BP, it did not affect its long-term stock market returns. Moreover, neither the reputational nor the stock market effects spilled over to other oil companies. If stock markets do not punish firms for their bad behaviors, do we have to rely on governmental regulations only? Does this mean that the ESG-based Larry Fink model of corporate governance is less likely to change corporate climate behavior? Here is the link to the article (it is open access) https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0268743 Abstract Do visible industrial accidents damage firms’ reputations and depress their stock market returns, and do these penalties spill over to other firms in the industry? On April 20, 2010, the Deepwater Horizon offshore oil rig in the Gulf of Mexico leased by BP exploded and sank, causing 11 deaths and the largest marine oil spill in US history. We examine the impact of this accident on BP’s reputation and stock market performance using data from YouGov’s BrandIndex and Capital IQ’s financial data for the period 2007–2017. We employ a synthetic control analysis to examine the extent and duration of these penalties. We find that in the aftermath of the Deepwater accident, BP’s reputation declined by approximately 50% relative to the synthetic control, and this decline persisted through the end of 2017. Yet, in terms of financial market returns, though the stock price dropped drastically in the first two months, we do not find a statistically significant decline in the stock market returns either in the mid-term (1–2 years) or the long term (2–7 years). In terms of spillover effects, we find no evidence of reputational damage or a decline in stock market returns for other oil and gas firms. These findings suggest that while environmental accidents invite swift and lasting reputational penalties, they might not depress the stock market performance in the long run. Moreover, the impact either on reputation or stock market returns does not necessarily spill over to other firms in the same industry. Aseem ____________________________________________________________ ASEEM PRAKASH Professor, Department of Political Science Walker Family Professor for the College of Arts and Sciences Founding Director, UW Center for Environmental Politics<http://depts.washington.edu/envirpol/> University of Washington, Seattle aseemprakash.net<http://aseemprakash.net> -- You received this message because you are subscribed to the Google Groups "gep-ed" group. To unsubscribe from this group and stop receiving emails from it, send an email to gep-ed+unsubscr...@googlegroups.com. To view this discussion on the web visit https://groups.google.com/d/msgid/gep-ed/CO1PR08MB7644D9136DADFE4E51E92F94DDB19%40CO1PR08MB7644.namprd08.prod.outlook.com.
