Environmental Incidents and the Market Value of Firms: An Empirical Investigation in the Chinese Context

CKY Lo, CS Tang, Y Zhou, Andy Yeung, D Fan

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We examine firms listed on the Shanghai/Shenzhen Stock Exchange to investigate stock market reactions to 294 Chinese manufacturing firms involved in 618 environmental incidents between 2006 and 2013. Through our event studies, we find empirical evidence of a significantly negative stock market reaction to announcements of environmental incidents. Our empirical analysis reveals that Chinese firms with a higher government share (of ownership) and recognition of social responsibility tend to be less affected by such incidents; however, Chinese firms with stronger personal political ties (i.e., top management teams or board members with concurrent or prior government appointments) are actually affected more when environmental incidents occur. Moreover, environmental incidents caused by Chinese firms can have a significantly negative impact on the market value of their overseas customers.
Original languageEnglish
Pages (from-to)389-600
Number of pages211
JournalManufacturing and Service Operations Management
Issue number3
Early online date11 Apr 2018
Publication statusE-pub ahead of print - 11 Apr 2018


  • environmental incident
  • China
  • stock market reaction
  • supply chain
  • social responsibility


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