H1: Ceteris paribus, firms with more extensive environmental disclosures in their financial reports experienced a less negative market reaction to the legislative events leading to the Superfund Amendments and Reauthorization Act of 1986.
H2: Ceteris paribus, firms with higher levels of future Superfund costs experienced a more negative market reaction to the legislative events leading to the Superfund Amendments and Reauthorization Act of 1986.
H1: Overall effect of SARA was negative, and specific legislative actions resulted in a negative abnormal return.
H2: Correlations between the firm-specific market reaction to the specific legislative events (CAR) are significant (at p < .10) and suggest that environmental disclosures included in financial and environmental information from the EPA are individually relevant in explaining changes in share value.
The proxy developed for maximum expected costs under joint and several liability had the largest and most significant correlation with market reactions. Results are not due to environmental variables proxying for firm-specific factors associated with negative general news. Regression analysis found that additional information disclosed by a firm does not significantly reduce uncertainty concerning the firm’s exposure to Superfund costs.