The Effects of Environmental Disasters and Pollution Alerts on Chinese Equity Markets

Environmental disasters not only cause severe losses in human lives and well-being but also affect economic and industrial activities, influencing firm performance and investors’ risk perceptions. We investigate the effects of 18 chemical disasters, oil spills, and pollution alerts on the Chinese stock market from 2003 to 2015. We find that these events generate significantly positive or negative returns, depending on the industry. Our results show no clear pattern suggesting that polluting industries are the most penalized; however, they indicate that environmental disasters create uncertainties in the market and often change investors’ risk perceptions in both the short and long term