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- Title
Hazardous Waste Lawsuits, Financial Disclosure, and Investors' Interests.
- Authors
Little, Philip; Muoghalu, Michael I.; Robison, H. David
- Abstract
This paper tests whether there is a systematic relationship between stock price reactions to publicly announced hazardous waste mismanagement lawsuits and the financial treatment of those suits. The primary assumption of the study is that market is sufficiently efficient to estimate the impact of the lawsuit on firm value. In this study, it is assumed that market can evaluate the probability of firms losing suits, expected penalties and clean-up-costs, loss of goodwill, the potential for subsequent damage suits, environmental insurance coverage and the like. Two primary laws regulating waste disposal and clean up are the Resource Conservation and Recovery Act and the Comprehensive Environmental Response Compensation and Liability Act. Both these acts establish strict and several liability. Firms attempting to decide whether to disclose a hazardous waste lawsuit face conflicting incentives. In general, firms will disclose suits if disclosure will reduce the present value of future cash flows.
- Subjects
WASTE management; STOCK prices; HAZARDOUS substances; FINANCIAL disclosure; INVESTORS; ACTIONS &; defenses (Law)
- Publication
Journal of Accounting, Auditing & Finance, 1995, Vol 10, Issue 2, p383
- ISSN
0148-558X
- Publication type
Article
- DOI
10.1177/0148558X9501000213