DiGiuli, Alberta. “Pollution and Firm Value.” Working paper (ESCP Europe, Paris), March 1, 2013.
From the author's abstract: "This paper tests the effect of pollution and peaks in pollution caused by companies on their market value and on the value of their competitors. Using the US TRI (Toxic Release Inventory) database of chemical toxic emissions, provided by the EPA (Environmental Protection Agency) to track SP500 firms’ emissions from 1996 to 2007, we find that the market does not penalize firms that pollutes heavily (at least in the long run), and consumers do not punish polluting firms switching to competitors. Pollution peaks are associated with an increase in the market values of competitors in the year of the peak. Results suggest that the positive effect is driven by investors’ overreaction and fear of possible consumer switch, loss of reputation and penalties for the polluting firm."