CERCLA AND DEEP POCKETS: MARKET RESPONSE TO THE SUPERFUND PROGRAM

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Abstract
This paper uses event study methods to estimate wealth effects upon shareholders who are named by the U.S. Environmental Protection Agency (EPA) as potentially responsible parties at a Superfund site. Impacts appear to be divided into three periods: an initial program period where stock market effects depend largely on prior visibility of the site, a second period where likely financial impact is more important, and a third period where notification has little association with either visibility or financial measures. However, the expected remediation cost burden is not borne evenly. “Deep‐pocket” firms appear to be disproportionately penalized by the market during the second period.