Toxic Chemical Releases and Idiosyncratic Return Volatility: A Prospect Theory Perspective

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aut.relation.endpage2143
aut.relation.issue2
aut.relation.journalAccounting and Finance
aut.relation.startpage2109
aut.relation.volume63
dc.contributor.authorBahadar, S
dc.contributor.authorNadeem, M
dc.contributor.authorZaman, R
dc.date.accessioned2023-10-17T22:32:01Z
dc.date.available2023-10-17T22:32:01Z
dc.date.issued2022-04-24
dc.description.abstractWe investigated whether and how firms’ toxic chemical releases (TCRs) affect idiosyncratic return volatility (IRV) using a prospect theory lens. Utilising a large sample of US public listed firms over the period 2001–2018, we find a significant and positive association between TCRs and IRV, suggesting that firms releasing more toxic chemicals have higher IRV. Additional analyses show that a positive association between TCR and IRV is more evident among firms with (i) high revenue, (ii) lower financial constraints and (iii) fewer environmental violations. A further test also suggests that a positive association between TCRs and IRV is contingent on political leadership ideology and market states. Our results remain consistent with weighted TCRs, IRV based on the Fama–French three-factor model, fixed-effect two-stage least square estimator (FE-2SLS), and other robustness checks. These findings shed light on the role of equity markets as a driver for capital-intensive pollution abatement activities and enhanced compliance with environmental laws, standards and best practices.
dc.identifier.citationAccounting and Finance, ISSN: 0810-5391 (Print); 1467-629X (Online), Wiley, 63(2), 2109-2143. doi: 10.1111/acfi.12951
dc.identifier.doi10.1111/acfi.12951
dc.identifier.issn0810-5391
dc.identifier.issn1467-629X
dc.identifier.urihttp://hdl.handle.net/10292/16794
dc.languageEnglish
dc.publisherWiley
dc.relation.urihttps://onlinelibrary.wiley.com/doi/10.1111/acfi.12951
dc.rights.accessrightsOpenAccess
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/
dc.subjectSocial Sciences
dc.subjectBusiness, Finance
dc.subjectBusiness & Economics
dc.subjectFama-French three-factor model
dc.subjectidiosyncratic return volatility
dc.subjectprospect theory
dc.subjecttoxic chemical releases
dc.subjectCORPORATE ENVIRONMENTAL PERFORMANCE
dc.subjectBEHAVIORAL AGENCY MODEL
dc.subjectFINANCIAL PERFORMANCE
dc.subjectPOLLUTION-ABATEMENT
dc.subjectEQUITY PREMIUM
dc.subjectSTOCK RETURNS
dc.subjectRISK
dc.subjectINFORMATION
dc.subjectMANAGEMENT
dc.subjectGREEN
dc.subject38 Economics
dc.subject3502 Banking, Finance and Investment
dc.subject35 Commerce, Management, Tourism and Services
dc.subject1402 Applied Economics
dc.subject1501 Accounting, Auditing and Accountability
dc.subject1502 Banking, Finance and Investment
dc.subjectAccounting
dc.subject3501 Accounting, auditing and accountability
dc.subject3502 Banking, finance and investment
dc.subject3801 Applied economics
dc.titleToxic Chemical Releases and Idiosyncratic Return Volatility: A Prospect Theory Perspective
dc.typeJournal Article
pubs.elements-id454670
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