Implications of the British petroleum oil spill disaster for its industry peers - evidence from the market reaction and earnings quality

Yun-Sheng Hsu, Cathy Zishang Liu, Yan-Jie Yang and Yan-Yu Chou

Asia-Pacific Journal of Accounting & Economics, 2013, vol. 20, issue 3, 281-296

Abstract: As one of the worst environmental catastrophes in US history, the British Petroleum (BP) Deepwater Horizon explosion and oil spill have profound implications for the oil and gas industry. This study examines the stock market reaction and earnings quality of BP's peers in response to the imminence of regulatory threats. Our empirical evidence indicates that a significantly negative intra-industry reaction occurred. In addition, petroleum companies with more extensive pre-disaster environmental disclosures experienced a less negative reaction. Finally, our analysis finds that petroleum companies tended to depress earnings via discretionary accruals post the BP oil spill. Our study is motivated by mounting attention to the increase in environmental risks and the need for enhancement in environmental accounting reporting requirements (The Securities and Exchange Commission 2010).

Date: 2013
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Citations: View citations in EconPapers (3)

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DOI: 10.1080/16081625.2012.739963

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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