There is abundant evidence showing how those firms who are responsible for environmental catastrophes often receive punishments that translate into stock market losses which exceed the amount of the fines received
The extent to which a firm’s activities impact the natural environment is an increasingly relevant topic in today’s managerial life. Failing to demonstrate a responsible and friendly attitude towards the natural environment may lead to strong negative consequences for a firm’s financial performance. Hundreds of examples in business press and general media are proof of the harshness with which powerful stakeholders punish firms that misbehave from an environmental standpoint. For example, BP’s recent disaster in the Gulf of Mexico caused the company more than 50% of its market capitalization. These catastrophes do not vanish quickly, but on the contrary stay in people’s minds for many years. The leakage of methyl isocyanate –a highly toxic gas– in a Union Carbide’s facility in Bhopal, India, that killed more than 3,000 people in 1984 still remains present in our memories.
[This research paper has been reproduced with permission of the authors, professors of IE Business School, Spain http://www.ie.edu/]