Abstract Introduction This paper examines a number of US chemical industry incidents and their effect on equity prices of the incident company. Furthermore, this paper then examines the contagion effect of this incident on direct competitors. Method Event study methodology is used to assess the impact of chemical incidents on both incident and competitor companies. Results This paper finds that the incident company experiences deeper negative abnormal returns as the number of injuries and fatalities as a result of the incident increases. The equity value of the competitor companies suffer substantial losses stemming from contagion effects when disasters that occur cause ten or more injuries and fatalities, but benefit from the incident through increasing equity value when the level of injury and fatality is minor. Conclusions Presence of contagion suggests collective action may reduce value destruction brought about by safety incidents that result in significant injury or loss of life. Practical Applications This research can be used as a resource to promote and justify the cost of safety mechanisms within the chemical industry, as incidents have been shown to negatively affect the equity value of the not just the incident company, but also their direct competitors.
Highlights We examine US chemical industry incidents and their effects on equity prices. We investigate the existence of sectoral contagion effects Incident company abnormal returns are correlated to injuries and fatalities. Competitor company equity values show devaluations based on contagion effects.
Do industrial incidents in the chemical sector create equity market contagion?
Journal of Safety Research ; 55 ; 115-119
2015-08-19
5 pages
Aufsatz (Zeitschrift)
Elektronische Ressource
Englisch
G14 , G15 , G32 , Chemical incidents , Stock markets , Contagion effects , Risk management , Event study
Do industrial incidents in the chemical sector create equity market contagion?
Online Contents | 2015
|INDUSTRIAL PACKAGING - Equity firm buys into reconditioning sector
Online Contents | 2008