Sectoral differences in market reactions to environmental fines
Keywords
Loading...
Authors
Issue Date
2025-07-04
Language
en
Document type
Journal Title
Journal ISSN
Volume Title
Publisher
Title
ISSN
Volume
Issue
Startpage
Endpage
DOI
Abstract
This research studies whether investor reactions to environmental fines differ across industry sectors in the United States. Using an event study methodology and cross-sectional regressions, the study explores the short-, mid- and long-term stock market impact of environmental penalties issued between January 2020 and January 2025.
Findings indicate that, in the short-term, companies in capital-intensive sectors, labelled as ‘Heavy Industry’ in this research, face significantly more negative abnormal returns than firms in more labor-intensive sectors. After controlling for outliers, the relative fine size also becomes a significant predictor of short-term abnormal returns. However, these effects do not persist over a longer event window. Mid- and long-term analyses reveal no consistent evidence of market underperformance in fined firms compared to matched peers in a Difference-in-Difference analysis.
These results suggest that markets respond differently across sectors in the short run but tend to absorb and move past these events over time. The study contributes to the growing literature on environmental enforcement and finance by highlighting the temporary and conditional nature of market responses to regulatory sanctions.
Description
Citation
Supervisor
Faculty
Faculteit der Managementwetenschappen