Market incentives for safety in hazardous industries: the case of chemicals and oil

Recent studies have debated the stock markets role as an enforcer of environmental regulation. Oil and chemical companies are insured against most direct cost of an accident, but they cannot insure against increased regulation oversight, and damage to reputation. We examine stock market reactions to 76 petro-chemical accidents on a sample of worldwide publicly traded \u85rms from 1987-2005. Speci\u85cally, we \u85nd that the market penalty is related to media coverage and human harm, but unrelated to environmental harm. This result appears to reinforce the need to establish liability for damage to nature