How does the stock market respond to chemical disasters? A
worldwide analysis ∗Gunther Capelle-Blancard†‡

and Marie-Aude Laguna

October 19, 2007

Abstract
In this paper, we examine the stock market reaction to 64 chemical disasters over theperiod 1990-2005. On average, petrochemical rms in our sample experienced a drop in
their market value of nearly 1% the day of the accident and of 1.40% over the rst week.
The equity value decline is signicantly related to human harm, and to chemical pollution.
Besides, rms experiencing accidents in the US and in Japan incur a higher decline in equity
returns, as well as rms that experienced accidents since 2000 by contrast with the 1990s.
Thus, our results shed light on the current debate about the stock market's role as an enforcerof environmental regulation.
JEL Classication: G14, Q27, Q51.
Keywords: Technological Risk, Event Study, Environmental Liability, Disclosure, Insurance.

Preliminary version∗

Financial support from the French Ministry of Ecology and Sustainable Development is gratefully acknowl-

edged. We thank Thierry Chauveau, Frédéric Jouneau-Sion, Paul Lanoie, Sandrine Lardic, Stéphanie Monjon,
Pierre Morin, Georges Prat, Sandrine Spaeter and Andreas Ziegler for helpful comments, as well as participants at
the AFFI International Conference 2005, the Second Toulouse-Montreal Conference on the Law, Economics andManagement of Larges-Scale Technological Risks 2005, and the European Economic Association Annual Congress
2006. We also thank Richard Jonathan for research assistance. The usual disclaimer applies.
†
Université Paris 1 Panthéon-Sorbonne. 106-112 bd de l'hôpital 75013 Paris, +33 1 44 07 82 70.

Email:

gunther.capelle-blancard@univ-paris1.fr.
‡
Agence de l'Environnement et de la Maîtrise de l'Energie & Université Paris 1 Panthéon-Sorbonne. 106-112
bd de l'hôpital 75013 Paris, +33 1 44 07 82 71. Email: marie-aude.laguna@malix.univ-paris1.fr. Corresponding

author.

1

1

Introduction

Chemical disasters are one of the major technological risks that modern societies face.

Such

accidents directly aect rms' revenues by disrupting their production process, but they also
generate negative externality on health and ecosystems.

Catastrophes like the explosion in

Seveso (Italy) in 1976, the release of toxic gas in Bhopal (India) in 1984, or the explosion of a
BP renery in Texas (US) in 2005 clearly illustrate the enormous risk potential of petrochemicalplants. These catastrophic accidents were very well publicized, but they are only the visible partof the iceberg. On average, an accident in the petrochemical industry occurs every 86 minutes
in the United States, where each year chemical disasters kill 23 employees and injure 1,000,
according to the National Environmental Law Center and the Wharton Risk Management and
Decision Processes Center. In Europe, between 1971 and 2005, there was about 30 technologicalaccidents that each resulted in 25 or more fatalities. For the rest of the world, there is no publicly
available data, but as regulatory standards outside the USA and Europe are less stringent, it isreasonable to expect that industrial accidents there are at least as frequent and cause at least
as many serious injuries and deaths.
Central to the debate over the need for government regulation of technological risks is thequestion of the incentive the private market could provide companies to take appropriate measures, comply with safety standards, or innovate in order to prevent accidents.

A number ofstudies examine this issue. They use event-study methodology to assess to what extent shareholders react to rm-specic environmental news.

Such news concerns the US Toxic Release

e.g. Hamilton, 1995), public disclosure programs in developing countries (e.g. Dase.g. Lanoie
and Laplante, 1994, Karpo, Lott and Wehrly, 2005), or broad sets of pollution news (e.g.
Inventory (gupta, Hong, Laplante and Mamingi, 2004), lawsuits for environmental violations (Klassen and McLaughlin, 1996). Futhermore, a number of papers examine specic accidents:

e.g.Bowen, Castanias, and Daley, 1983), Bhopal (e.g. Salinger, 1992), Cher1
nobyl (e.g. Kalra, Henderson, and Raines, 1993)), Exxon-Valdez (e.g. White, 1996)... However,Three Mile Island (to the best of our knowledge, there is no global approach to the phenomenon of chemical disasters. This paper seeks to ll this gap.
The aim of this paper is to examine the stock market response to chemical disasters. To dothis, we build an original sample of 64 explosions in chemical plants and reneries worldwide
for 1990-2005. The software

Factiva (which covers more than 10,000 news titles) was used tosearch in a systematic way for the press articles mentioning companies responsible for industrial
disasters. We also build a number of variables of interest featuring the social consequences of eachdisaster, such as their eect on health and the environment. On average, half of the accidents
provoked at least one serious injury or death, and a quarter of them resulted in a toxic release.
The advantage of such large dataset is twofold: it greatly improves the statistical signicanceof our assessment of the stock market reaction and, at the same time, it allows to examine thedeterminants of the market reaction.
The rst part of the econometric analysis is dedicated to a global event-study.

We assesslosses incurred by shareholders, as well as shifts in the systematic risk of petrochemical rmsexperiencing a disaster. As rms carry insurance against most direct costs, the decline in rmvalue is likely to be related to costs that are uninsured.

Indeed, in practice, rms are notinsured against a wide range of costs related to accidents. Moreover, on the event of accidents,
stakeholders are very likely to modify their belief about the safety of a particular plant or of
the industry in general (insurance premiums may increase; the public authorities may reinforce
regulations; customers, employees, suppliers and investors may abandon rms, etc.). Overall,1

See Capelle-Blancard and Laguna (2007) for a survey.

2

our results indicate that rms do incur a nancial loss in the event of chemical disasters. Threeout of four accidents in our sample are associated with negative abnormal returns, and onlya small portion of them (17%) are followed by statistically signicant losses.
surprising that,

It is not reallyindividually, signicance is dicult to detect given the stock returns volatility.
global signicance. On average,

Fortunately, since our dataset is large, we are able to draw

abnormal returns amount to -0.94% the day of the accident and to -1.40% the rst week. Thisremains true even if we exclude the main accidents. In conclusion, the adverse eect on stock
price is not peculiar to some (huge) accident.
In a second part, we attempt to explain the variability in abnormal equity returns. We ndthat the number of fatalities and serious injuries as well as incidental pollution increase themagnitude of market losses. Moreover, our results show that bigger rms incur lower losses andthat disasters in the US and Japan are associated with higher losses. Finally, we nd that equity
losses have increased since 2000.
The paper is organized as follows. Section 2 describes the data and the key indicators. Event
study results are discussed in Section 3. Cross-section analysis of abnormal returns is presented
in Section 4. The paper concludes with a summary in Section 5.

2

Description of the data

2.1

The sample of accidents

The aim of this paper is to provide robust empirical evidence on the stock market reaction
to chemical disasters.

Unfortunately, there is no global, publicly available list of the major

chemical disasters that disclose the names of companies responsible for disasters. Some countries2

list industrial accidents , but, due to a principle of commercial condentiality, the names ofcompanies responsible for accidents are not usually disclosed, at least outside the US. Note that
this is all set to change with recent environmental policies aimed at disclosing pollution records,
in order to inform consumers, shareholders and citizens and thereby facilitate their choice ofsocially responsible rms.

To cite an example, we can mention, in the European Union, theREACH program for chemicals.

To identify the chemical disasters, we compiled a corpus of print media articles for the period
1990-2005. Note that all accidents considered in the literature so far occurred in the 1980's. Since
then, many rules and regulations designed to prevent such disasters have come into eect, andin this respect it is interesting to investigate the stock market response to industrial accidents
in the 1990s and 2000s.

A systematic search using the software Factiva search 2.0 Beta was carried out. The software
Factiva search 2.0 Beta covers all major newspapers and publications in the world. We selected
all news articles written in English (over 10,000). The search was carried out using two keywords:"explosion" and "chemical plant", and excludes all accidents reported by newspapers before 1990
and after 2005. Obviously, since the media focus attention on the more serious chemical disasters,
there is a selection bias, and our sample understates the number of chemical explosions that haveoccurred since 1990. Using the two keywords, we started with about 200 events. Of these, twothirds were eliminated because they do not involve publicly traded companies (they concernedstate-owned companies, illegal factories, etc.).
Datastream, which covers more than 75% of publicly listed companies in the world, was used
to identify a sample of 38 publicly traded companies responsible for the remaining 64 accidents.

2

For instance, in Europe, since the accident of Seveso in Italy in the mid-seventies, all rms are obliged to

notify accidents to public authorities. In the US, the Environmental Protection Agency provides a complete listof chemical accidents that have occurred in the US since the 1990s.

3Half of the rms are big multinationals and are among the 50 biggest rms in terms of sales.

3

In our sample, there are also smaller rms which have sales below US$2 million: Daiichi Pharm.,
Lubrizol, Crompton, Albright&Wilson, Guerbet, and Lonza Group. Their shares are listed on
the stock markets of ten developed countries (Australia, France, Germany, Japan, Netherlands,
Norway, Spain, Switzerland, United Kingdom, the United States) and two emerging countries(South Africa and South Korea).
The list of accidents and a brief description of each is presented in the Appendix.

2.2

The features of accidents

The distinctive characteristics of accidents are also drawn from print media. We consider indirectspeeches by local populations, public authorities, unions and company spokespersons, environmental interest groups, citizens' groups, re brigades, the police, etc., as reported in newspaper
articles. We group information into several indicators. Table 1 reports descriptive statistics on

4

the economic, environmental and human eects of accidents.

Pollution. In our study, pollution is measured by a dummy equal to one if we have informa-tion that the accident resulted in a toxic release. Chemical releases are classied as toxic on thebasis of the statements issued by the authorities, environmentalist groups, and the companies
themselves. For instance, the authorities state that "no dangerous chemicals were released into
the air" (March 1992, Dow Chemical); or that "more than 10 tons of poisonous chemicals werereleased" (February 1993, Hoescht). Overall, we assess that in one quarter of the accidents, thechemical release was toxic enough to contaminate the environment.

5 The toxic release dummy

variable is poorly and negatively correlated with media coverage (-0.05).

Human harm. More than half of the accidents resulted in at least one fatality and a serious

injury. The average number of fatalities and serious injuries is 2.6. Note that only injuries that

6 The number of fatalities and serious injuries

were listed as "in serious condition" are included.

is weakly correlated with their media coverage (0.54).

Firm Newsworthiness. The news coverage of disasters may depend on whether at the timeof the accident the rm which is responsible for the disaster is of major concern for journalists.
In the same way, Hamilton (1995) intends to control for companies whose TRI receive media
coverage during 1989, and uses as an exogenous dummy to explain the abnormal returns of eachrm following the publication of the TRI. The problem is that in order to measure the eectof the news coverage of a disaster on the subsequent abnormal returns, we need to counter anobvious simultaneity bias.

This bias is due to the fact that the news coverage of a disaster

depends on the same variables, such as the number of fatalities, pollution cases, etc.

Given

the diculty to nd valid instruments, the newsworthiness of rms shortly before the disasters
is used instead. To do this, we compute the number of newspaper headlines that mention thecompany in the twenty days before the accident.

3

7 It is reasonable to believe that the biggest

They include the following rms, listed by ranking: Dow Chemical, BASF, Royal Dutch Shell, Exxon Mobil,

Total, Bayer, BP, Mitsubishi Chemical, Mitsui Chemical, Akzo Nobel, Sumitomo Chemical, Air Liquide, DSM,
Asahi Kasei, Yara, Rohm and Haas, Sasol, Rhodia, LG Petrochemical.

Source:The Annual Survey of theAmerican Chemical Society, Chemical & Engineering News (July 24, 2006).

4
5

Table 8 in the Appendix gives the correlation matrix between variables.
We also attempted to proxy the social cost of accidents using the number of nearby residents that were

evacuated or warned to stay indoors as a precaution, but information was too limited.

6

We also built a variable for the number of minor injuries, for all injuries that are not reported as serious, but

this variable does not change the results.

7

Cormier and Magnan (2007) use a very similar variable, called the "rm media exposure" as an explanatory

variable to explain the news environmental voluntary reporting strategy of rms. They compute the total numberof news stories referring to a particular rm's environmental activities in a given year; on the same as well as in
distinct events.

4

Table 1:

Descriptive statistics for the sample of chemical disasters

The sample is composed of 64 accidents in the petrochemical industry over the period 1990-2005. Accidents are identify using the software Factiva search 2.0 Beta. Only publicly listed rms are considered.

Variables of interest

Expected# Mean Median Std. Dev. Min Max eect on rmmarket value

Ser. injuries and fatalities
Toxic release

64
64

2.36
0.23

1
0

4.76
0.43

0
0

30
1

−
−

# previous accidents
Dummy year > 1999
Firm NewsworthinessCountry of listing
US
EU
Japan
Emerging countries
Country of accident
US
EU
Japan
Emerging countries

64
64
64

0.73
0.36
0.06

0
0
0.05

1.13
0.48
0.03

0
0
0

5
1
0.2

−
?
?

64
64
64
64

0.36
0.32
0.11
0.06

0
0
0
0

0.48
0.47
0.31
0.24

0
0
0
0

1
1
1
1

?
?
?
?

64
64
64
64

0.39
0.33
0.12
0.06

0
0
0
0

0.49
0.47
0.33
0.24

0
0
0
0

1
1
1
1

?
?
?
?

64

9.32

9.15

1.65

5.17

12.52

?

Variables of control

Financial variables
Sales (in log)
Abbreviations:Ser.

injuries and fatalities:

Number of serious injuries or fatalities; Toxic release = 1 if theaccident provoked a toxic release and 0 otherwise ; Dummy year > 1999 = 1 if the accident occurred after 1999
and 0 otherwise. See the text for further details concerning the sample and the variables; Firms Newsworthiness :ratio of headlines mentioning the rm over twenty days before disasters to the total number of headlines received
in the previous year (Factiva database).

5

i.e., they receive more headlines) overall. Therefore, to avoid
multicollinearity problem in our regressions, we use the variable Firms Newsworthiness whichrms are more "newsworthy" (measures the ratio between the number of headlines that mention the rm in the twenty days
before a disaster and the total number of headlines received in the previous year. As expected,

Temporary Firms Newsworthiness is equal to 5.5% on average, but it varies between 0 andthe

20%. This conrms that some rms happen to be more newsworthy than others at the time ofdisasters.

Countries. We expect that structural dierences between countries may be relevant, as aredierences in environmental liability (see Clarke, 2001), dierences in the stringency of regulation(see Hammit et al., 2005), and dierences in legal origin (see La Porta et al., 2002). Thus, wei) rms listed in the US; ii) rms listed
in the European Union; ii) rms listed in Japan; iii) accidents that occurred in the US; iv)
8
accidents that occurred in Europe; and ii) accidents that occurred in Japan.
introduce six country dummy variables to control for:

Time and previous occurrences. We use dummy variables to control for the period inwhich the disasters occurred. Several period lengths are tested in order to capture correctly thetime eect: dummies are set equal to one if the accident occurred in the period before 1995,
between 1995 and 1999, between 2000 and 2005, and also in the whole period before 2000. We
also include a variables to measure the number of accidents previously experienced by each rm
in our sample.

Economic variables. We control for the size of rms. Size is measured by the log of sales(in US$ million) the rst year before the accident.

We can assume that investors pay more

attention, and are likely to be more sensitive, to accidents sustained by big rms. However, as
the shares of small rms are less liquid, the impact of an accident in a small rm may be more
severe. Moreover, small rms do not have the same opportunity as big rms to reallocate theirproduction across plants in order to fulll their contracts in the event of an accident.

3

Equity returns losses following chemical disasters

Studies on the nancial cost of catastrophic events usually focus attention on a specic andnotable event (see Capelle-Blancard and Laguna (2007) for a comprehensive survey). All these
papers use the event-study methodology. The event study methodology is briey reviewed in therst subsection. We then provide evidence of average equity value losses for the overall sampleof accidents, and also show evidence of the eect on equity returns of each rm experiencing adisaster.

3.1

The event study methodology

To examine stock price behavior surrounding explosions in petrochemical plants, we performeda daily event study as implemented by MacKinlay (1997). The change in equity value associatedwith an explosion in a petrochemical plant is taken as an unbiased estimate of the nancial
consequences of the accident (all expected uninsured future costs).
The market model is applied to describe the behavior of asset returns and to separate outchanges in value caused by overall market eects from those changes caused by the accident
itself. The normal relation between the observed returns of a given stock i at time t, Ri,t , andthe market returns at the same time, Rmt , is given by:

Ri,t = αi + βi Rmt + εi,t . The term
βi Rmt is the portion of the return to security i on day t that is due to marketwide factors.
8

We also considered country dummy variables for emerging countries, and common law countries, but they

were not signicant. Thus, to save space, we do not report the results.

6

The parameter αi measures that part of the average daily return on the stock that is not due
to market movements.

Lastly,εi,t measures that part of the change in the value of rm's istock on day t that is not due to either movements in the market or to the rm's average daily
return. On the day of an event (here the explosion in a chemical plant or in an oil renery), thedeviation in an individual stock's daily return from what is expected based on equation (1), thatis, the prediction error, is taken as an unbiased estimate of the nancial eects of the event. Let

ci − βbi Rmt stand for this abnormal return or prediction error where α
ci and βbi are
ARi,t = Ri − α9respectively, the estimates of αi and βi .
Following MacKinlay (1997), we calculate an individual t-statistic for each rm's abnormal
return for each accident-day. Moreover, the average abnormal daily return for all accidents inthe sample, AARt , is calculated along with its statistical signicance. The sum of the individualt-statistics follows a distribution that is asymptotically normal with mean zero and varianceequal to the number of observations.

The z-statistic for the average is then the sum of theindividual t-statistics divided by the square root of the number of observations.

10 Finally, toexamine the total loss in return from explosions, we look at the cumulative average abnormal
returns starting with the accident date, CAARt .

3.2

Full sample results

Figure 1 reports the average abnormal returns and the cumulative average abnormal returns for

11 Further, in Table 2, we consider threethe rst twenty trading days following the accident.

dierent panels. In Panel A, CARi,t are aggregated across all accidents (N = 64). In Panel B,
we consider only accidents which do not cause statistically signicant negative CARi,t<10 at the
5% level (N = 11). In Panel C, CARi,t are aggregated across accidents which cause statisticallysignicant negative CARi,t<10 at the 5% level (N = 53); therefore, Panel B is Panel A less PanelC.
On average, shareholders suer a signicant loss of 0.94% the day of accident, of 1.38% thefollowing day, and reach a maximum of 1.40% the fourth day after the accident, associated witht-stat of -3.95, -4.08 and -2.95 respectively, so that, all the gures are statistically signicant at
the 5% level. This result is consistent with the ecient hypothesis, according to which stock
prices quickly reect news announcements.
About three quarter of rms experienced negative abnormal returns the day following theaccident, but only eleven accidents caused individually signicant abnormal returns at the 5%
level.

12

In Panel B, we still nd for the remaining 53 rms signicant and negative cumulative averageabnormal returns at the 5% level for the day of accident and the following day (-0.65% and 0.94%, respectively). In Panel C, we remove the 53 accidents that did not provoke a signicantdrop in the equity value of each corresponding rms at the 5% level.

On average, investor's

reactions tend to persist over a period of 20 days, much longer than for the Panel A of accidents.

9

To check the robustness, we have dropped accidents when the parameters βi is not signicant. It does notbchange the results.

10

Another measure of signicance aggregates, into a single portfolio, the abnormal returns of all petrochemicalcompanies experiencing an accident for the day of each rm's explosion. It then uses the daily variance of returns
on this portfolio to calculate a t-statistic.

??

This test, however, attributes more weight to observations of rms

with a high variance in returns, and is therefore more sensitive to distortions from very noisy observations.

1112

See gures B andin the Appendix for long term AARt=[1;120] and CAARt=[1;120] .

We also examined whether the price pressure was associated with a signicant shift in trading volumes. We

dened abnormal volume as the dierence between the average turnover ratio logarithm through the period [190; -10] and the observed turnover ratio logarithm after the disaster. volumes of stocks were not statisticallysignicant from zero.

7

Figure 1: Abnormal Returns with Condence Intervals at the 5% level

1

1,5

0,5
0,5

-0,5
0
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20

-1,5

-0,5

-2,5

-3,5

-1

-4,5
0

-1,5

(a) Average abnormal returns (in %)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

(b) Cumulative average abnormal returns (in %)Notes: Abnormal returns are computed given the market model parameters estimated with OLS through theperiod [-190; -10] in event time. Event time is days relative to the accident date. The sample period is from 1990
to 2005.

Table 2:Abnormal returns following accidents in the petrochemical industry

This table reports cumulative average abnormal return (CAARt ) up to the specied day t in event time (in%). Event time is days relative to the accident date. Abnormal returns are computed given the market model
parameters which are estimated with OLS through the period [-190; -10] in event time.

CARit < 0 is thepercentage of rms i with a negative CARit . Panel A: All accidents. Panel B: Accidents which cause statisticallysignicant negative CARit,t<10 at the 5% level. Panel C: Panel A less Panel B. The sample period is from 1990
to 2005.

Panel A: 64 events

Panel B: 11 events

Panel C: 53 events

t

CAARt

t-statCARit < 0CAARt

t-statCARit < 0CAARt

t-statCARit < 00-0.94***

-3.95

69%

-2.31***

-5.14

92%

-0.65**

-2.36

64%

1

-1.38***

-4.08

75%

-3.39***

-5.23

92%

-0.94**

-2.43

71%

2

-1.24***

-3.00

64%

-3.88***

-4.94

92%

-0.66

-1.40

58%

3

-1.40***

-2.95

63%

-4.88***

-5.43

100%

-0.65

-1.18

55%

4

-1.19**

-2.25

60%

-4.59***

-4.56

100%

-0.45

-0.75

51%

5

-1.29**

-2.21

55%

-4.32***

-3.93

92%

-0.63

-0.94

47%

6

-1.14*-1.82

60%-4.50***

-3.81

92%

-0.41

-0.57

53%

7

-1.14*-1.70

57%-5.23***

-4.14

92%

-0.25

-0.33

49%

8

-1.14

-1.60

49%

-5.49***

-4.11

92%

-0.19

-0.23

40%

9

-1.16

-1.54

55%

-5.30***

-3.76

83%

-0.25

-0.30

49%

10

-1.05

-1.33

55%

-5.44***

-3.68

83%

-0.09

-0.10

49%

15

-1.31

-1.38

52%

-5.63***

-3.16

75%

-0.37

-0.34

47%

20

-1.72

-1.58

58%

-6.05***

-2.97

83%

-0.78

-0.62

53%

40

-1.80

-1.18

63%

-5.46*

-1.92

67%

-1.00

-0.57

62%

80

-2.27

-1.06

60%

-4.70

-1.18

67%

-1.74

-0.71

58%

120

-1.09

-0.42

54%

-8.95*

-1.84

67%

0.62

0.21

51%

Note: *, **, *** denote statistically signicance at the 10%, the 5% and the 1 % level, respectively.

8

Shareholder suer an equity loss of 2.31% on average the day of accidents at the 1% level. The
cumulative returns for the following day is -3.39% and for the rst twenty days is -6.05% (t-stat= -5.23 and -2.97 respectively).
Overall, the average abnormal returns documented in Table 2 are in line with expectations
drawn from previous research, which examined the impact of various negative environmental
events on market value (see Capelle-Blancard and Laguna, 2007).

Particularly,i) Muoghalu,

Robison and Glasckock (1990) showed that the drop in rm market value associated with lawsuit
lings for hazardous waste mismanagement came to -1.23%;ii) Hamilton (1995) documented

cumulative abnormal returns up to -1.20% following the rst TRI release (-1.13% for Konar andCohen (1997));iii) Klassen and McLaughlin (1996) estimated that shareholders suered a lossof -1.5% in case of environmental crisis, etc.

3.3

Two notable cases: Total (2001) and BP (2005)

In this subsection, we examine in greater detail the two most notable cases.

13

BP America Renery Explosion, Texas City, March 23, 2005. The most recent and famous

accident in our sample is the explosion of a BP renery in Texas on March 23, 2005. The renery
is BP's largest in the U.S. and the country's third largest.

The explosion and re killed 15

contract workers and injured more than 170 people. The explosions occurred when a distillation
tower ooded with hydrocarbons and was overpressurized, causing a geyser-like release from thevent stack.

14 . The Chemical Safety Board had long maintained that in the past BP's bosses

did not spend enough time and money on the safety of their employees. Its report released on
March 20, 2007, was no dierent, and concluded that cost cuts mandated by the company's
London headquarters contributed to the tragedy - and that bosses ignored successive warnings
that an accident was imminent. BP had already been ned US$21 Million for 301 egregious,
wilful violations of safety rules by the Occupational Safety and Health Administration - thebiggest penalty in the body's 35-year history.

15 More than 800 press media articles mention

this accident for the rst ten days, and BP incurred a drop in equity returns of -2.43% at the
1% level the day after. hours worked by sta who are in critical safety roles.

Total France Agrochemical Plant Explosion, Toulouse, September 21, 2001. The worst ac-

cident in terms of number of deaths is the explosion of the AZF agrochemical plant in France
on September 21, 2001. An explosion in a storage hangar in which 300 tonnes of ammonium
nitrate granules were stored for recycling at the fertilizer plant killed 30 people and injured 200
more. It destroyed or damaged over 10,000 homes. We assess that the explosion resulted in asignicant drop of $3 billion in Total's market capitalization, associated with a signicant abnormal return of -3.74% on the explosion day. Market reaction did not last more than 3 days.
The company beneted from $500 million of insured property damages, and public aid from the
French government of Euro229 million.
Previous empirical evidence has focused on the most dramatic accidents that happened in
the late 1970s and the 1980s.

By contrast, our sample includes accidents after 1990, and it

appears that the stock market reaction is faster but temporary, while the magnitude of the drop
is somewhat lower.

Indeed, according to Salinger (1992), for instance, after the explosion of

the Union Carbide plant in Bhopal in 1984, the rm market value fell from $3.5 to $2.5 billion(-28%) and, the rst month, the abnormal return was -31%. Concerning the Exxon-Valdez oil
spill in 1989, White (1996) reports that little impact was observed for the rst twenty or so

13

Table 5 in the Appendix reports estimated cumulative abnormal returns for the rst day, the rst ve days

and the rst 120 days following each accident.

14
15

Source: U.S. Safety and Hazard Investigation Board
Source: The Economist, March 22 2007, The Guardian, March 20, 20079

trading days after the accident; the stock price decrease was gradual, with a signicant negative
cumulative abnormal return of -19% even after 120 days.

16

Thus, three factors are likely to

explain why the shareholder reaction is immediate and of lower scale: rst, accidents have lessdramatic consequences, thanks to stricter safety and environmental regulation; second, rmsmay have increased their insurance coverage; third, accidents are much more publicized andnancial markets are more ecient.

3.4

Shift in the systematic risk

Up to now, we have only considered how rm market capitalization varies following a serious
technological accident. It is probable, however, that such accidents also have an eect on rmsystematic risk,

i.e. the beta.

In this paper, we follow the approach proposed by Baginski, Corbett and Ortega (1991),

Ri,t = ai + βi1 Rmt + Di + βi2 P osti Rmt + ui,t where t =[-180; 180], Ri,t is rm i return on day t, Rmt is the day t market return, Di = 1 on event day(mm/dd/yy) and the day after and D = 0 otherwise, P osti = 0 for days -180 to -1 and P osti = 1

and we estimated the following model:

for post-accident period (days 0 to 180). Parameters are estimated using robust ordinary leastsquares using White-corrected standard errors to correct for the presence of heteroskedasticity.
It must be pointed out that, given our large sample, it seems very dicult to theoretically
predict the average sign or the magnitude of the beta shift. Indeed, recall that the systematic2

risk for the rm i is: βi ≡ Cov(Ri,t , Rm )/σm = ρi,m σi /σm where Cov(Ri,t , Rm ) is the covariance
between Ri and Rm , ρi,m is the correlation rate between the two returns, whereas σm and σi
represent their standard deviations. Thus, following a serious accident, the rm's betas are as
likely to increase as to decrease: the increase may come from a higher variance of the rm's
equity returns, while the decrease may come from the fact that the rm's stock price will not
follow the market as it normally would, but will react to rm-specic news. And if the two eects

17oset each other, the beta may stay the same. To save space, we only report salient results.

In our sample, nine chemical disasters signicantly increased rms' systematic risk. Amongthem, we come across the two worst accidents of our sample in terms of number of deaths: theexplosion of the AZF plant (Total) in France in 2001, and the explosion in a BP plant in the
US in 2005.

We have documented, in the previous subsection, an abnormal return of -3.74%

for Total and -2.44% for BP. It appears now that the two rms also experienced a signicantincrease in their systematic risk: +0.31 for Total and +0.52 for BP.
Interestingly, we observe several cases for which we document no signicant abnormal returns,
but a beta increase. For instance, the explosion in one of the biggest hydrogen peroxide units inthe world (Oxysynthèse, jointly owned by Air Liquide and Elf Aquitaine), on 22 April 1992 in
France, provoked the shut down of the plant and obliged the company to declare

force majeure toits customers. We nd a signicant increase in the systematic risk of the two parent companies,
Air Liquide (+0.20) and Elf Aquitaine (+0.23), but no signicant drop in their equity returns
following the disaster. This is also the case for BASF (+0.32), following an explosion in July,
1990 that caused one death, four serious injuries, and the closure of the plant for several weeks;or, more recently, for Total (+0.21), after the explosion in July, 2001 in a petrochemical plantin the US, which caused one death and the evacuation of 2,000 people, but only minor economic
losses.
Lastly, some accidents provoked a signicant and negative change in the systematic risk of16

Some studies examine the impact of the nuclear accidents at Three Mile Island and Chernobyl, but results

are not directly comparable since they concern the power industry as a whole. See, for instance, Capelle-Blancard
and Laguna (2007).

17

See Table 6 in the Appendix for complete results.

10the rms responsible for those accidents. This is the case, for instance, for a re in a Germanrenery of Shell in March 2000 (-0.46), for the explosion in a Marathon Oil renery in January
2003 that resulted in the shut down of the plant (-0.27), for the explosion in February 2003
in an Exxon Mobil facility which caused three deaths (-0.38), or for the explosion in a LG
Petrochemical plant in September 2004 (-0.41).

4

How to explain the stock market response to chemical disasters?

In this section, we estimate the determinants of equity value declines after serious accidents in the

18 Robust linear regressions are used to relate cross-sectional dierences

petrochemical industry.

in the magnitude of abnormal returns to the features of accidents.

4.1

Determinants of abnormal returns following chemical disasters.

In columns (XX) and (XX) of Table 3, we report results from an OLS regression where thedependent variable is the

Cumulative Average Abnormal Returns up to the rst and second day

19 The explanatory variables are: number of fatalities and serious injuries

following disasters.

(in log); a dummy variable for accidents that released toxic chemicals; the number of previous
chemical disasters experienced by rms (in our sample); theTemporary Firms Newsworthiness as

described above; dummy variables for accident years after 1999; three country dummy variables
for accidents that happened in the US, accidents that happened in Europe, and accidents that
happened in Japan; and the log of sales in the year before that of accidents.
Our main result is that the seriousness of accidents, as measured by the total number of20

fatalities and serious injuries do increase abnormal losses in equity returns.
statistically signicant at the 1% level and robust using all specications.

The result isThis result is inline with previous studies on airplane crashes that nd that investors are strongly sensitive to21

information on fatalities and serious injuries.

Moreover, rms that release a toxic chemical as a result of disaster (often provoking thecontainment or the evacuation of thousands of persons) do incur losses of a greater magnitude.

18

To the best of our knowledge, no such attempt has been made up to now. Most studies about the eects ofenvironmental and industrial incidents on shareholder wealth do not provide further explanation of the determinants of investors' reactions. In contrast, the literature on airplane crashes, for instance, (e.g. Borenstein and
Zimmerman, 1988) considers several explanatory variables (number of deaths, drop in sales, cause of accidents,etc.) to explain the magnitude of equity value losses following crashes. The paper by Broder (1990) is the mostclosely related to our work, in showing that investors are actually very sensitive to the number of deaths

19

Muoghalu et al.(1990) also use abnormal returns, whereas Hamilton (1995) uses the dollar value of theestimated abnormal returns as a dependent variable. We test the alternative specication, but do not nd any
particular change. To check for robustness we also perform a robust logit regression, where the dependent variable
is set equal to 1 if CARi,t=2 is negative and signicant at the 5% level. Overall, our results do not change. Notethat the event study relies on the assumption that residuals of the market model are Gaussian white noise. By
contrast, the logistic distribution is similar to the normal except in the tails, which are considerably heavier.
Results are available upon request.

20

As shown above, the two most fatal accidents in our sample (Total in 2001 and BP in 2005) lead to signicantabnormal returns. But, the third, the fourth and the fth worst accidents in terms of number of deaths (Albright& Wilson Chemicals in the US in June 1991, Repsol in August 2003 in Spain, and Sasol in South-Africa in
September 2004), which caused the deaths of at least ten employees, did not lead to signicant abnormal returns.
Furthermore, when we compute average abnormal returns only for accidents that provoked at least one serious
injury or fatality (equal to the median of fatalities and serious injuries), we nd that the magnitude of the loss ismore important (AAR0 = −1.33%; CAAR[0;+3] = −2.07%).

21

Broder (1990) nds signicant and sustained losses following accidental deaths involving either a rm's

workplace or product.

11Given that environmental concerns is a burning issue and journalists as governmental authorities
are very sensitive to pollution news, this result is quite promising. We infer from that result that
toxic release does convey valuable information for investors. The reason may be that rms areperceived as liable for damage to nature, as is already the case in the US for instance. Therefore,
compulsory disclosure of pollution incidents in nancial statements as in the US or in France

Nouvelles Régulations Economiques, 2001) appear as a suitable tool. However, we do not nd(evidence of a reputation eect, in that the number of previous accidents experienced by rmsdo not increase the equity returns losses.
We also nd that abnormal losses are lower for rms which are of major concern for journalists
in the period before disasters. It appears that theFirms Newsworthiness has a positive eect

on abnormal returns at the 1% level. We infer from that result that extensive publicity in thepress shortly before disasters (for reasons we ignore) actually mitigate the nancial impact ofdisasters.
Controlling for the size of rms is crucial, since it also gives a proxy for the liquidity of stocks,
insurance coverage, and rms' opportunities to divert their production. Thus, we expect thatbigger rms are less likely to be aected by accidents. This hypothesis is conrmed by the data:
its coecient is positive and signicant at the 5% level in columns (1)-(4), and the the 10% incolumns (5)-(6).
We nd interesting additional evidence after controlling for country dierences.

In everyspecication, rms experiencing accidents in the US, in Japan and in the EU incur greater losses
at the 1% level than rms experiencing accidents in other countries.

22 Given the stringency of

the regulation in the US as well as a more developed tort liability jurisdiction, this result is not

23 Note that we have also tested separately country dummies for rms listed in thesurprising.

US, rms listed in Europe, and rms listed in Japan, but they were not signicant and were
excluded to improve the parsimony of our regressions.
We use several specications to control for the time eect that are not reported to save space.
We conrm that rms experiencing accidents since 2000 have incurred higher losses at the 5%
and 10%level as shown in Table 3.

5

Conclusion

Firms carry insurance against many of the costs of an accident, such as equipment and businesslosses, and tort liability.

But big accidents go beyond the limits of insurability and investors

are expected to anticipate non-insured costs raised by lawsuits, damage to reputation... Consequently, accidents may cause signicant drop in rm market value.
In this paper, we consider a unique sample of 64 accidents in the petrochemical industry
over the period 1990-2005. A quarter of the accidents in our sample result in a toxic release,and half of them result in at least one death or serious injury. We nd that the stock market
reacts negatively (and instantaneously, which conrms the nancial markets' overall eciency
with regard to the release of new information) to explosions in chemical plants and reneries.
Shareholders of petrochemical companies suer an equity loss of 1.38% on average on the rstday following disasters. In this respect, our study conrms previous results based upon the studyof harmful environmental events and industrial accidents.
The concomitance of several factors may explain negative abnormal equity returns:
number of fatalities, the release of a toxic chemical, past safety records,

22
23

etc.. In contrast to

But note that this result does hold when the same specication is used to explain CARi,t=0 .
See Hammit et al. (2005) for a challenging statement.

12

the

Table 3:

ters

Determinants of Cumulative Abnormal Returns Following Chemical Disas-

We report results from least squares regressions using White-corrected standard errors to correct for the presenceof heteroskedasticity. The three dependant variables are the Cumulative Average Abnormal Returns up to second
day following disasters: CAAR[0;+] for t = 0, 1, 2.

t=0

t=1

t=2

log (Fatalities and Serious Injuries)−0.662[0.00]∗∗∗−0.511[0.07]∗−1.017[0.00]∗∗∗

Toxic Release−0.375[0.28]−1.385[0.02]∗∗−1.554[0.04]∗∗

10.723[0.03]∗∗

19.326[0.01]∗∗∗

31.384[0.00]∗∗∗# Previous Accidents−0.265[0.06]∗−0.281[0.16]−0.295[0.24]

Year > 1999

−0.797[0.03]∗∗−1.173[0.04]∗∗−1.357[0.05]∗

Accident in Japan−0.410[0.48]−2.266[0.00]∗∗∗−2.767[0.00]∗∗∗

Accident in the US−0.216[0.69]−1.040[0.08]∗−1.987[0.00]∗∗∗

Accident in the EU−0.525[0.34]−1.873[0.01]∗∗∗−3.133[0.00]∗∗∗

0.505[0.00]∗∗∗

0.596[0.00]∗∗∗

0.570[0.01]∗∗

Firms Newsworthinesslog SalesN
Log pseudolikelihood
F
Adj. R-squared (%)

64−104.85.8
25.3

64−127.84.1
23.6

64−142.2
10.8
28.2

Note: Robust p-values are in brackets: *, **, *** denote statistically signicance at the 10%, the 5% and the 1% level, respectively.

13

previous studies which consider a single major disaster, we are able with our database to examine
in greater detail the determinants of investors' reactions.
In this paper, we present a cross-sectional analysis of abnormal returns. The estimated costof an accident is often kept condential by rms or is unknown at the time of accidents.

Totackle this, we build indicators on the human and environmental impacts of accidents. We argue
that the number of injuries, the number of deaths, and the number of people evacuated may
provide useful, albeit imperfect, indicators of the direct cost of an accident. We nd that declines
in equity returns are related to the number of fatalities, and to incidental pollution. We inferthat investors associate fatal human harm as well as incidental pollution with future uninsured
costs, such as legal expenses, a drop in sales, safety compliance costs and advertising expenses.
Furthermore, our study provides a unique insight into the international comparison of stock
market reactions to chemical disasters. Investors are expected to respond partly to structuraldierences between countries, such as regulations over technological and environmental risks.
Indeed, tort liability and liability for damage to nature are more strict in the US. Actually, wend that rms experiencing accidents in the US, but also in Japan and in the EU incur a stronger
decline in equity returns, by contrast with other countries such as UK. Finally, in accordancewith the growing importance given to environmental issues over time, we nd that rms incur
equity losses of a greater magnitude since 2000 by contrast with the 90s. Besides, we do not ndevidence of a reputation eect, in that rms which experienced a greater number of accidents
in the past do not incur a drop in equity returns of a greater magnitude. Finally, we also ndthat rms with greater media exposure shortly before accident (for reasons we ignore) incur
equity value losses of a lower magnitude. We infer that a greater and temporary publicity in thenewspapers actually mitigate the nancial impact of disasters.

References[1] Baginski, S. P., R. B. Corbett, and W. R. Ortega, 1991. Catastrophic Events and Retroactive
Liability Insurance: The Case of the MGM Grand Fire, Journal of Risk and Insurance, 58:247-260.
[2] Borenstein, S. and M.B. Zimmerman, 1988, Market incentives for safe commercial airline operation,
American Economic Review, 78(5), 913-935.
[3] Bowen, R.M., R.P. Castanias, and L.A. Daley, 1983, Intra-industry eects of the accident at Three
Mile Island, Journal of Financial and Quantitative Analysis 18, 87-111.
[4] Broder, I.E., 1990, The cost of accidental death: A capital market approach, Journal of Risk andUncertainty, Volume 3, Number 1, March.
[5] Capelle-Blancard, G., and M.-A. Laguna, 2007, The Impact of Environmental News on Firms
Market Value: A Survey, Working Paper, Université Paris 1 Panthéon-Sorbonne.
[6] Dasgupta, Susmita, Hong, Ho Jong, Laplante, Benoit, and Nlandu Mamingi, 2006,Firms' environmental performance: Does news matter ?, Policy Research Working Paper no. WPS 3888.
[7] Hamilton, J.T., 1995, Pollution as News: Media and Stock Market Reactions to the Toxic Release
Inventory Data, Journal of Environmental Economics and Management, 28, 98-103.
[8] Kalra, R., G.V. Henderson,and G.A. Raines, 1993, Eects of the Chernobyl nuclear accident on
utility share prices, Quarterly Joumal of Business and Economics 32,52-78.
[9] Karpo, Jonathan M., John R.Jr. Lott, and Eric W.Wehrly, 2005, The Reputational Penalties
for Environmental Violations: Empirical Evidence, Journal of Law and Economics, Vol. XLVIII,
October.
14[10] Lanoie, P. and B. Laplante, 1994, The market response to environmental incidents in Canada: atheoretical and empirical analysis, Southern Economic Journal, 60, 657-72.
[11] MacKinlay, A. Craig , 1997. Event Studies in Economics and Finance, Journal of Economic Literature, American Economic Association, vol. 35(1), 13-39.
[12] Muoghalu, M., H.D. Robison, and J.L. Glascock, 1990, Hazardous Waste Lawsuits, Stockholder
Returns, and Deterrence, Southern Economic Journal 7(2), 357-70.
[13] Salinger, Michael, 1992, Value Event Studies, Review of Economics and Statistics, Volume 74 , Issue
4, November, 671-77.
[14] White, M. A.,1996, Investor Response to the Exxon Valdez Oil Spill, University of Virginia Charlottesville, VA: McIntire School of Commerce.

15

A

Appendix

List of accidents and main features

Date

Firm

Listing Accident # Serious Dummy = # print SalesCountry Country injuries and 1 if Toxic media in USD
fatalities
release articles million

03/20/90

Royal Dutch Ptl.

NL

UK

0

1

12

66.79

05/26/90

Daiichi Pharm.

JAP

JAP

7

0

5

1.49

07/19/90

BASF

GER

USA

5

0

23

32.81

03/12/91

Union Carbide

USA

USA

1

0

25

7.62

06/17/91

Tenneco

USA

USA

12

0

21

XX

12/13/91

DSM

NL

NL

7

0

9

6.16

02/10/92

BP

UK

UK

3

0

15

49.31

04/22/92

Elf Aquitaine

FRA

FRA

1

0

1

37.05

04/22/92

Air Liquide

FRA

FRA

1

0

1

5.87

09/08/92

Akzo Nobel

NL

NL

1

0

2

9.26

11/09/92

Total

FRA

FRA

6

0

22

26.41

01/26/93

Lubrizol

USA

USA

0

1

1

1.54

02/22/93

Hoechst

GER

GER

0

1

4

26.26

03/15/93

Hoechst

GER

GER

2

0

24

26.26

05/02/93

Dow Chemicals

USA

GER

1

0

1

18.97

05/03/93

Marathon Oil

USA

USA

0

0

1

12.78

07/04/93

Sumitomo Chemical

JAP

JAP

1

0

28

9.11

08/02/93

Exxon Mobil

USA

USA

3

1

18

100.0304/08/94

Olin

USA

USA

0

0

3

2.42

05/27/94

Royal Dutch Ptl.

NL

USA

3

1

62

58.99

06/04/94

BP

UK

FRA

4

0

4

54.66

08/08/94

Exxon Mobil

USA

USA

0

0

32

97.82

10/15/94

Rohm Haas

USA

USA

0

0

3

3.27

04/04/95

Crompton

USA

CAN

1

0

5

0.59

08/16/95

Ashland

USA

USA

0

0

1

9.46

08/20/95

Du Pont De Nemours

USA

USA

0

1

8

34.04

11/21/95

Lyondell Chemical

USA

USA

0

0

2

3.86

12/05/95

Ak Steel Hdg.

USA

USA

1

0

19

XX

12/05/95

FMC

USA

USA

0

1

19

4.01

12/29/95

Mitsubishi Chem.

JAP

JAP

1

0

2

10.45

01/27/96

Hoechst

GER

GER

1

1

13

33.33

04/01/96

Crompton

USA

USA

1

0

3

0.66

07/17/96

Mitsui Chemicals

JAP

JAP

1

0

9

3.11

10/03/96

Albright & Wilson

UK

UK

0

1

26

1.19

11/17/96

FMC

USA

USA

0

0

6

4.51

12/04/96

FMC

USA

USA

0

0

2

4.51

12/22/96

Wyman Gordon

USA

USA

8

0

68

0.40

04/04/97

Du Pont De Nemours

USA

JAP

0

0

2

38.35

04/04/97

Mitsui Chemicals

JAP

JAP

0

0

2

3.01

12/23/98

Sumitomo Chemical

JAP

JAP

0

0

2

8.98

06/08/99

Bayer

GER

GER

0

1

14

28.28

16

03/23/00

Royal Dutch Ptl.

NL

GER

0

0

1

55.53

06/07/00

BP

UK

UK

0

0

30

77.21

06/10/00

BP

UK

UK

0

1

41

77.21

09/03/00

Total

FRA

FRA

0

0

3

39.21

10/12/00

Solutia

USA

GER

0

0

4

2.83

12/09/00

Exxon Mobil

USA

SG

3

0

8

160.9004/25/01

Rhodia

FRA

FRA

1

0

1

6.61

07/14/01

Total

FRA

USA

3

1

79

102.1009/21/01

Total

FRA

FRA

30

0

267

102.1003/12/02

Asahi Kasei

JAP

JAP

0

1

42

10.70

09/03/02

Guerbet

FRA

FRA

0

0

0

0.22

01/08/03

Rhodia

FRA

FRA

0

1

2

8.35

01/12/03

Marathon Oil

USA

USA

0

0

14

31.46

02/21/03

Exxon Mobil

USA

USA

3

0

108

178.9008/13/03

DSM

NL

AUS

2

0

9

7.11

08/14/03

Repsol YPF

SP

SP

10

0

46

44.85

02/22/04

Lonza Group

SW

SW

0

0

9

1.98

03/31/04

BP

UK

USA

0

0

74

272.8006/11/04

Crompton

USA

CAN

0

0

15

2.18

08/25/04

LG Petrochemical

SK

SK

2

0

8

1.21

09/01/04

Sasol

SA

SA

10

0

64

11.48

01/04/05

Yara

NOR

FRA

0

0

0

6.37

03/23/05

BP

UK

USA

15

0

836

266.7017

18

Abnormal returns following accidents in the petrochemical industry by rms

06/04/94
08/08/94
10/15/94
04/04/95
08/16/95
08/20/95

BP

EXXON MOBIL

ROHM HAAS

CROMPTONASHLAND

DU PONT DE NEMOURS

01/27/96
04/01/96

MITSUBISHI CHEM.

HOECHST

CROMPTON

-1.78

-1.02

0.09

0.34

-1.13

-0.80

1.00

-0.75

-0.78

-0.57

1.22

-0.90

-0.11

-0.05

0.28

-2.35

0.91

0.35

-1.30

-0.96

0.88

-1.08

-0.69

-0.27

0.42

2.92

-0.43

-1.75

-3.72

-0.88

-2.46

0.09

t=0

-0.98

-0.87

0.18

-0.69

-3.00

0.12

-0.28

-1.13

-1.51

-0.92

-0.84

-1.73

-0.09

-0.93

-1.03

-0.96

3.32

0.59

-1.98

-2.77

-0.89

-1.54

-0.63

-1.53

1.58

3.17

-0.92

0.55

-4.19

-0.94

-3.91

-0.21

t=1

-2.57

0.68

-1.36

0.74

-2.91

2.17

-0.39

-2.23

-1.51

2.40

1.46

-1.23

1.11

0.94

-1.58

-1.82

3.40

0.06

0.48

-3.54

-0.89

0.02

2.77

-1.20

0.89

-2.06

-5.18

-1.54

-10.80

-2.78

-4.29

-0.16

t=5

13.83

1.99

8.18

21.47

-20.05

30.39

2.62

6.73

-8.66

-6.39

9.78

-8.43

-2.92

6.82

-7.82

10.30

6.94

11.20

-4.51

-16.09

7.66

6.62

-6.39

3.56

10.23

-13.27

17.15

75.27

5.32

-4.40

17.03

3.44

t = 120

BP

YARA

SASOL

LG PETROCHEMICALCROMPTONBPLONZA GROUPREPSOL YPF

DSM

EXXON MOBILMARATHON OIL

RHODIAGUERBETASAHI KASEI

TOTAL

TOTAL

RHODIAEXXON MOBILSOLUTIA

TOTAL

BP

BP

ROYAL DUTCH PTL.

BAYER

SUMITOMO CHEM.

DU PONT DE NEMOURSMITSUI CHEMICALSWYMAN GORDON

FMC

FMC

ALBRIGHT & WILSONMITSUI CHEMICALS

Firm

Note: Statistically signicant at the 5% level in bold. Statistically signicant at the 10% level in italic.

12/05/95
12/29/95

AK STEEL HDG.

11/21/95

05/27/94

ROYAL DUTCH PTL.

12/05/95

04/08/94

OLIN

FMC

08/02/93

EXXON MOBILLYONDELL CHEMICAL

05/03/93

05/02/93

DOW CHEMICALS
07/04/93

03/15/93

HOECHST

SUMITOMO CHEM.

02/22/93

HOECHSTMARATHON OIL

11/09/92
01/26/93

09/08/92

AKZO NOBELLUBRIZOL

04/22/92

AIR LIQUIDE

TOTAL

02/10/92

DSM
04/22/92

12/13/91

TENNECOELF AQUITAINE

06/17/91

UNION CARBIDEBP

07/19/90
03/12/91

BASF

03/20/90
05/26/90

DAIICHI PHARM.

Date

ROYAL DUTCH PTL.

Firm

is from 1990 to 2005.

03/23/05

01/04/05

09/01/04

08/25/04

06/11/04

03/31/04

02/22/04

08/14/03

08/13/03

02/21/03

01/12/03

01/08/03

09/03/02

03/12/02

09/21/01

07/14/01

04/25/01

12/09/00

10/12/00

09/03/00

06/10/00

06/07/00

03/23/00

06/08/99

12/23/98

04/04/97

04/04/97

12/22/96

12/04/96

11/17/96

10/03/96

07/17/96

Date

-1.30

-3.71

-1.60

-1.28

0.14

0.27

-1.75

0.53

-0.30

0.32

0.75

-2.95

-3.23

-0.20

-3.74

-0.85

-3.29

-3.14

-0.59

2.93

-0.28

-2.48

-1.47

-1.40

-0.14

-0.12

-1.66

-6.36

-0.22

-0.37

0.70

0.04

t=0

-2.44

-5.69

-0.51

-1.41

0.66

-0.36

-1.79

0.48

-2.03

1.51

1.26

-7.18

-4.72

-3.03

-3.21

-0.98

-7.35

-2.22

1.01

2.95

1.36

-0.20

-2.33

-2.62

-3.44

-2.11

-4.20

-6.36

-0.89

-0.52

1.75

0.69

t=1

-1.47

-7.25

-1.60

-1.90

2.31

3.41

-0.28

1.71

-0.48

0.81

3.67

-3.67

-11.86

-1.05

-0.03

-1.35

-4.62

-5.08

-1.10

4.16

-0.10

1.68

-4.84

0.28

-3.42

-2.44

-5.87

-3.41

-3.00

0.68

5.32

1.68

t=5

1.09

-4.59

-12.11-22.15

74.12

9.16

-2.36

-6.67

-5.88

-12.1027.45-28.03

5.78

0.36

-3.63

-1.13

-69.12

-0.45

6.91

-14.48

-7.27

-3.93

16.59

-9.06

-16.89-9.06-31.7412.07-12.44-15.15-42.88-25.32

t = 120

Abnormal returns are computed given the market model parameters which are estimated with OLS through the period [-190; -10] in event time. The sample period

This table reports cumulative average abnormal return (CAARt ) up to the specied day t in event time. Event time is days relative to the accident date (mm/dd/yy).

Table 5:

B

Additional appendix (not intended for publication)
Figure A: Abnormal Returns with condence intervals at the 5% level (Panel C)

2

0

1,5

-1
-2

1

-3
0,5

-4
0
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0

1

2

3

4

5

6

7

8

-5

9 10 11 12 13 14 15 16 17 18 19 20

-0,5

-6

-1

-7

-1,5

-8
-9

-2

-10
-2,5

-11
0

-3

(a) Average abnormal returns (in %)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

(b) Cumulative average abnormal returns (in %)Notes: Abnormal returns are aggregated across accidents that cause statistically signicant negative CARt,t<10
at the 5% level.

Figure B: Long Term Abnormal Returns and Cumulative Abnormal Returns

1
4
0,6
2

0,2

0
0

10

20

30

40

50

60

70

80

90

100

110

120

-2

-0,2

-4
-0,6
-6
-1
-10

0

10

20

30

40

50

60

70

80

90

100

110

120

-8

(a) Average abnormal returns(b) Cumulative average abnormal returns

Notes: Abnormal returns are computed given the market model parameters estimated with OLS through theperiod [-190; -10] in event time. Event time is days relative to the accident date.

19

20

Impact of an accident on the risk and returns in the petrochemical industry

0.04

0.00

-0.07

0.16

-0.04

-0.02

0.02

-0.01

0.00

0.39

0.45

0.35

0.52

-0.61

0.24

-0.79

-0.82

0.26

0.04

-0.07

-0.68

-0.27

-0.40

-0.68

-0.10

0.05

-0.43

-0.74

1.35

0.08

-1.06

-0.72

-0.22

-1.13

0.13

-0.12

0.32

-0.32

0.27

0.14

0.03

-0.15

-0.07

-0.13

-0.07

-0.72

0.07

0.16

-0.15

0.04

0.30

0.32

0.02

0.18

0.08

0.15

0.04

0.01

0.09

0.14

0.24

0.72

0.08

-0.43
0.02

0.10

0.37

0.10

-0.30

-0.12

-0.23

0.16

0.44

-0.08
-0.15

0.44

0.05

0.37

0.32

0.55

0.57

0.18

0.20

0.02

0.28

0.47

-0.01

0.52

0.11

0.20
0.23
0.62

-0.27

-0.06

0.54

0.19

0.32

0.74
0.37

0.02

R2

0.22

β2

BP

YARA

SASOL

LG PETROCHEMICALCROMPTONBPLONZA GROUPREPSOL YPF

DSM

EXXON MOBILMARATHON OIL

RHODIAGUERBETASAHI KASEI

TOTAL

TOTAL

RHODIAEXXON MOBILSOLUTIA

TOTAL

BP

BP

ROYAL DUTCH PTL.

BAYER

SUMITOMO CHEM.

DU PONT DE NEMOURSMITSUI CHEMICALSWYMAN GORDON

FMC

FMC

ALBRIGHT & WILSONMITSUI CHEMICALS

Firm

Note: Statistically signicant at the 5% level in bold. Statistically signicant at the 10% level in italic.

01/27/96
04/01/96

HOECHST

12/29/95

MITSUBISHI CHEM.

CROMPTON

12/05/95

AK STEEL HDG.

08/20/95
11/21/95

08/16/95

ASHLAND

DU PONT DE NEMOURS
12/05/95

04/04/95

CROMPTONLYONDELL CHEMICAL-0.04

10/15/94

ROHM HAAS

FMC

-0.04

08/08/94

0.11

-0.02

0.08

EXXON MOBIL

OLIN

0.02

05/27/94

04/08/94

EXXON MOBIL-0.06

06/04/94

08/02/93

SUMITOMO CHEM.

-0.07

-0.02

0.02

0.01

-0.05

0.00

0.07

1.29

-1.75

-0.10

0.22

-1.31

-0.05

-0.04

-0.01

ROYAL DUTCH PTL.

07/04/93

MARATHON OIL

D

-0.14

0.10

BP

05/02/93
05/03/93

DOW CHEMICALS

03/15/93

HOECHST

09/08/92

AKZO NOBEL

02/22/93

04/22/92

AIR LIQUIDEHOECHST

0.01

04/22/92

ELF AQUITAINE

11/09/92

02/10/92

BP

01/26/93

12/13/91

DSM

TOTAL

0.00

06/17/91

TENNECO

0.01

-0.06

07/19/90
03/12/91

0.09

UNION CARBIDE

LUBRIZOL

β1

0.97
0.62 -2.01
0.59
0.96
0.71
1.07
0.80
0.99
0.71
0.90
1.00
1.01
1.05
0.94
0.93
0.63
0.72
1.06
1.02
0.55
0.65
0.45
1.02
0.85
0.80
1.02
0.13 0.91
0.67

a

BASF

03/20/90
05/26/90

ROYAL DUTCH PTL.

Date

DAIICHI PHARM.

Firm

1990 to 2005.

03/23/05

01/04/05

09/01/04

08/25/04

06/11/04

03/31/04

02/22/04

08/14/03

08/13/03

02/21/03

01/12/03

01/08/03

09/03/02

03/12/02

09/21/01

07/14/01

04/25/01

12/09/00

10/12/00

09/03/00

06/10/00

06/07/00

03/23/00

06/08/99

12/23/98

04/04/97

04/04/97

12/22/96

12/04/96

11/17/96

10/03/96

07/17/96

Date

-0.06

-0.77

-1.87

0.02

0.17

0.41

-1.12

0.69

-0.54

0.06

-0.75

0.60

0.40

-1.28

-1.61

-0.66

0.02

-1.58

-0.60

-1.31

-0.98

0.04

0.04

0.00

1.44

0.63

0.01

-0.98

-0.85

-1.14

-0.64

-2.20

-0.27

-0.12

0.91

0.39

D

0.07

-0.03

0.11

0.02

-0.09

0.03

-0.05

0.02

-0.01

-0.13

0.15

-0.02

0.06

0.03

-0.14

0.05

0.00

0.05

0.01

0.00

0.02

0.03

0.10

0.02

0.16

-0.07

0.42

β1

0.11

0.35

0.22

0.27

0.23
-0.05

0.29

-0.41

0.33

0.13

0.51

0.41

0.58

0.40

0.26

0.02

0.46

0.39

0.33

0.20

0.02

0.05

0.12

0.05

0.05

0.35

0.26

0.32

0.35

0.19

0.04

0.20

0.20

0.11

0.13

R2

-0.52

-0.01

-0.16

0.13

-0.02

0.32

0.23

-0.03

0.21

0.24

0.07

-0.13

-0.11

0.01

0.03

0.21

-0.44

-0.12

-0.20

-0.24

0.42

β2

0.51
0.88
0.68
0.65
-3.79
-0.24 1.11
-0.59
0.98
1.01
0.61
1.05
-0.46
0.50
0.49
0.46
0.69
0.62
0.40
0.58
0.58 -2.13 0.31
1.14
0.69
0.72
-0.27
0.95
-0.38
0.62
0.74
0.70
1.00
2.39
0.76
0.98
0.87
1.00
0.52
-0.09

-0.11

a

are estimated using robust ordinary least squares using White-corrected standard errors to correct for the presence of heteroskedasticity. The sample period is from

The model estimated is:

Ri,t = ai + βi1 Rmt + Di + βi2 P osti Rmt + ui,t where t = [-180; 180], Ri,t is rm i return on day t, Rmt is the day t market return, Di = 1
on event day (mm/dd/yy) and the day after and D = 0 otherwise, P osti = 0 for days -180 to -1 and P osti = 1 for post-accident period (days 0 to 180). Parameters

Table 6:

Table 7:
Variable dependent:

Normality Tests

CARi,t=2 . Abnormal returns are computed given the market model parameters estimatedwith OLS through the period [-190; -10] in event time. Event time is days relative to the accident date.

Skewness/Kurtosis Test

Shapiro-Wilk Test

Pr(Skewness)

Pr(Kurtosis)

adj chi2(2)Prob>chi2

0.011

0.053

8.82

0.0121ObszProb>z67

2.172

0.01493

21

22

1
-0.21
-0.30
0.24
0.17
0.11
-0.15
-0.23
0.13
-0.08
0.35
-0.05
0.14
-0.11
0.23

1
0.54
-0.05
-0.31
0.03
0.45
0.19

0.09
-0.13
-0.03
-0.07
-0.02

0.18
-0.07
-0.08
-0.03

0.02
-0.04
-0.09
-0.14

-0.04
-0.11
0.17
-0.07
-0.14

1
-0.02
-0.04
0.10
-0.07

0.00
-0.05
0.25
-0.10

-0.03
0.18
-0.16
0.24
0.04

1
-0.41
-0.43
-0.06

0.10
0.11
-0.20
0.01

-0.25
-0.11
0.33
-0.19
0.01

1
-0.03
0.00

0.08
-0.02
-0.12
-0.05

0.14
-0.10
0.05
-0.14
-0.16

1
0.12

Toxic Chemi- OIL # prev.
release
cals
acci.

-0.27
0.09
0.07
0.24

-0.15
-0.17
-0.01
0.03
0.11

1

> 1995

0.59
-0.53
-0.28
-0.13

1
0.76
-0.68
-0.34
-0.13

CL

Correlation matrix

0.64
-0.43
-0.18
-0.06

1
-0.52
-0.26
-0.19

USA

-0.33
0.75
-0.25
-0.17

1
-0.24
-0.17

EU

-0.27
-0.23
0.93
-0.09

1
-0.09

Japan

Country of listing

-0.07
-0.17
-0.09
0.73

1

EC

1
-0.51
-0.29
-0.20

USA

1
-0.09

1
-0.24
-0.17

sample and the variables.

the accident occurred after 1995 and 0 otherwise; CL: Common Law countries; EU: Europe; EC: emerging countries. See the text for further details concerning theif the rm is a member of the Oil Insurance Ltd and 0 otherwise; # prev. acci.: Number of previous accident by the same rm (in our database); > 1995 = 1 if

Toxic release = 1 if the accident provoked a toxic release and 0 otherwise ; Chemicals = 1 in the rms belong to the chemical industry and 0 otherwise; OIL = 1

1

Japan ECEUCountry of accident

Abbreviations: Media: Number of print media articles for the rst ten days following disasters (Factiva search 2.0 Beta ); Fat.: Number of fatalities or serious injuries;

Listing
CL
USA
EU
Japan
EC
Accident
USA
EU
Japan
EC

> 1995

Media
Fatalities
Toxic release
Chemicals
OIL# prev. acci.

Media Fat.

Table 8:

23

An explosion ripped through part of a huge oil renery. Concern is centered on leaks of the chemical xylene, some ofBP (02/10/92)

DSM (12/13/91)

TENNECO (06/17/91)

UNION CARBIDE (03/12/91)

The explosion occurred when a vent line leading from a processing kettle became clogged, causing the kettle to become

BASF (19/07/90)
Six homes had been declared uninhabitable.

moderately toxic colorless gas.

It is an eye, skin and respiratory

Plant resumed operations June 29.

Damage and environmental impact

DSM was quick to counter suggestions that the fumes could poison theincident but readings were negative. Neither the renery nor petro-chemical complex was closed as a result of the re.

noxious emissions were reported. A gas detection van was sent to the north side of the River Forth, downwind of thethree others were injured. Two of the injured, both in intensive care, are in a "stable" condition with serious burns. No

at Grangemouth. A gas storage tank being built at docks near an oil renery burst into a reball. One man died andThe re occurred in a storage area for propylene and ethylene about a mile from the petrol chemical complex and renery

danger to area residents. But people complained of eye irritation caused by the fumes.

surrounding area. Ocials said the explosion did not cause the release of poisonous gases or fumes that would pose a

oil reneries and dangerous chemical plants.

of smoke over the port area, toxic smoke containing benzine enveloped the industrial zone, which is home to several

to a halt in the world's busiest port. Workers were evacuated from the area. The explosion and re sent a thick column

solvents. Six workers killed, one person was missing and injured another three. The blast temporarily brought all trac

The explosion in a storage tank of benzoic acid set re to adjoining tanks loaded with volatile hydrocarbon fuels andassessments to take 4-6 weeks.

were contract workers, not plant employees.

critically. The re was quickly extinguished, and no toxic releases were detected. Many of the workers killed or injured

re at a chemical plant killed six workers (one company employee and ve contract workers) and injured 33 others, four

The explosion occurred as workers were mixing chemicals to make a ame retardant used in textiles. An explosion andirritant.

No dangerous chemicals were released into the air.

appear to have relatively minor injuries. Carbide has declared force majeure on ethanolamine and glycol ether products.

to evacuate the area. 19 people at the plant were taken to the hospital. One person was seriously injured; the others

The cause of the blast had not been determined. Two dozens residents who live within a mile of the plant were ordered

has received about 1,500 reimbursement claims and has settled about half of them,surrounding residential neighborhood, shattering windows in houses and businesses up to a quarter-mile away. BASF

contain. The blast sent reballs 50 feet into the sky. A column of thick, black smoke poured from the building into the

The two explosions ignited a re that took 2 hours to

Air tests performed by the Ohio Environmental Protection

Agency around the plant found no toxic gases in the smoke.

evacuated.

overpressurized. Up to 63 people were injured, killing one worker, four were critically injured. About 1,000 people wereAn explosion rocked a chemical factory. Seven people were killed and 21 others injured, several with serious burns.

and the condition of the fth was described as "fair".

to the specialist burns unit, ve casualties were treated for smoke inhalation, and four had been released after treatment,

said it was unlikely the company would face court action. Six production workers had been injured. One was transferredwhich is believed to have been washed into the River Gowy, a tributary of the Mersey. But the National Rivers Authority

DAIICHI PHARM. (05/26/90)

ROYAL DUTCH PTL. (03/20/90)

Brief description of the accidents (article extracts)

24

An

MARATHON OIL (05/03/93)

DOW CHEMICALS (05/02/93)

HOECHST (03/15/93)

HOECHST (02/22/93)

LUBRIZOL (01/26/93)

TOTAL (11/09/92)

The blast happened in a gas ltration system attached to a reactor outside the main chemical plant. The cause of the

AKZO NOBEL (09/08/92)

No dangerous chemicals were released into

outside the renery. Only one minor injury

The explosion occurred. in a 5,000-gallon "sour water" storage tank at the renery. Ocials said there were no eects

the environment. The blast caused serious damage

explosion took place in a plastics container. A Dow Chemical spokesman said the explosion does not pose any risks for

An explosion in Dow Chemical Co group's Stade plant in Hambourg killed one worker and slightly injured another. The

Hoechst said temperatures in the re seemed not to have been high enough to release any dioxins.

on Tuesday. Results of the analysis will be published. Greenpeace had suggested that dioxins would have been released.

for analysis at the request of the regional environment ministry, after Greenpeace members blockaded part of the works

released from the plant into a residential neighborhood nearby. Scientists from the Fresenius Institute collected samples

River Main. But there was no trace of methanol in the ground. The accident came three weeks after noxious gases werekilling one worker and seriously injuring another. At least 12 kg of methanol was released with reghting water into thetougher safety controls. An explosion ripped through a factory belonging to the Hoescht chemical concern in Frankfurt

weeks - the rst involving the loss of life - and it immediately prompted calls from regional and national politicians forlong, 1,800 feet high and 1,500 feet wide. The blast is the seventh accident to happen at a Hoechst factory in the last three

An explosion ripped through a factory that manufactures the chemical polyvinylalcohol released a cloud of gas 3 miles

incident. The plant has been temporarily shut down by the Hesse environment ministry.

campaign. The local state environment ministry said nearly 100 people had reported respiratory problems after theno-one was hurt, dozens of residents visited doctors after the leak and there was an expensive and high-prole clean-up

suspected carcinogen ortho-nitroanisole discharged from the company's Griesheim plant into the atmosphere. Although

The blast occurred when explosive vapors were ignited by sparks from a hatch that was opened in error. Two tons ofis continuing.

from the Lubrizol Corp.'s chemical plant. Lubrizol ocials have ruled out an explosion as the cause. The investigation

Nine employees form a nearby Shell Oil Co. chemical complex had to be treated after a cloud of sulfuric acid escaped

explosion has been found. Six deaths and two injured. The renery won't operate at full capacity for several months"any risk of major pollution is remote." This was the worst accident at a French oil renery since 1966. No cause of thehave been caused by a gas leak, which started a re and blew up one of the facility's gas treatment units. Total said

La Mede plant near Marseille is the second largest of Total's three reneries in France. The explosions were thought toexplosion at Akzo subsidiary Diosynth's chemical works in the Netherlands. One person was killed.

the atmosphere and there was no need to evacuate nearby residents. Safety experts have begun an investigation into

reaction inside the lter, but that human error has not been ruled out.

explosion is not yet clear. It was possible there could have been a pressure buildup following an unexpected chemical

Idem.

burns.

inquest is being held into the cause of the accident. One person was killed. Two more people were taken to hospital withAn explosion ripped through the Oxysynthese hydrogen peroxide plant at Jarrie, the biggest unit in the world.

ELF AQUITAINE (04/22/92)

AIR LIQUIDE (04/22/92)

25

ASHLAND (08/16/95)

CROMPTON (04/04/95)

ROHM HAAS (10/15/94)

EXXON MOBIL (08/08/94)

BP (06/04/94)

ROYAL DUTCH PTL. (05/27/94)

OLIN (04/08/94)

EXXON MOBIL (08/02/93)

SUMITOMO CHEMICAL (07/04/93)

Three others

The blast occurred as workers mixed undisclosed chemicals.

were visible across the city.

explosive liquids at Witco Surpass Chemicals Ltd. Thick clouds of black smoke, billowing from the blazing tank farm,

factories in Scarborough. More than 30 reghters fought to prevent the re from spreading to storage tanks lled withAn explosion at a chemical plant ignited a blaze that injured one worker and forced hundreds from their homes andbeen shut down for its annual turnaround three days before.

of nausea and dizziness. A suspected cyanide leak was blamed for making workers ill. The acetone cyanohydrin unit had

A chemical exposure incident at Rohm and Haas's Deer Park complex that sent 32 people to area hospitals for treatment

Residents, however, complained that the explosion was toxic and that it has aected their health.

turn o their air conditioners and keep windows and doors closed as a precaution. ethylene, propylene and butadiene,

The explosion released a non-toxic hydrocarbon fuel oil into the air, ocials said. But nearby residents were advised to

The cause of the explosion was not known. There were no direct injuries, but seven contract workers were slightly hurt.

Several small explosions and a large re caused heavy damage at Exxon Chemical's Baton Rouge, petrochemical complex.

slightly injured. There was no fear of pollution or toxic emissions.

regarding safety of renery workers. Two people were killed and two others were missing. Five other employees wereopened. Unocial reports suspect the blast was caused by an accumulation of sulfurous gas. Unions have raised questions

Explosion at a BP France's 8.5-million tonnes/yr renery at Lavera-de-Matigues, southern France. An inquest has been

worldwide production of Shell's parent, Royal Dutch/Shell Group.

plant is still in place. The Belpre plant produced 325 million pounds of Kraton yearly, more than half the total annualof the plant were evacuated. The plant remains shut down and the force majeure on Kraton SBR shipments from thebattling the blaze-which sent ames 300 to 600 feet in the air-and approximately 1,700 people within a one-mile radiusdamaged and the company unable to fulll its contracts. Fireghters from 16 area re departments spent nearly 10 hours

with environmental and safety rules will both delay a reopening. The re left three presumed dead, the plant severely

The explosion may have been caused by "an abnormal chemical reaction". Physical damage and the need to comply

Homes within a mile of the plant were evacuated after an explosion that destroyed a building housing chemical tank.

smoke carried the slight odor of chlorine but is non-toxic. No serious injuries were reported.

The explosion at a chemical plant forced the evacuation of at least 1,000 people and temporarily closed Interstate. The

near the plant.

fumes and smoke," including hydrogen sulde, sulfur dioxide and carbon monoxide gases, on people living and working(sore throats, skin irritation, nausea and other maladies). The lawsuits maintain that the re spewed "noxious and toxic

than three weeks after the re, more than 400 people led a class-action lawsuit contending the incident made them sickto 65 M$. The re killed three workers, caused personal and property damage to 2,700 people outside the plant. Less

Fire spewed noxious and toxic fumes and smoke, on people living and working near the plant. Material damages cameround-the-clock. The plant that produces more than half the world's supply of epoxy resin used in making semiconductors.

windows in about 100 homes near the plant. At the time of the explosion, 11 workers were at the plant, which operates

The blast, which occurred at the factory's epoxy resin plant loosened doorways and broke

A worker died in an explosion and re that destroyed a chemical plant in Niihama, Ehime Prefecture.
suered minor injuries.

26

Pipe burst releasing 23,000 gallons of sulphuric acid, 1,500 residents evacuated from nearby homes. At least 38 treated

ALBRIGHT AND WILSON (10/03/96)

MITSUI CHEMICALS (07/17/96)

CROMPTON (04/01/96)

Two separate leaks at Hoechst plants resulted in the emission of noxious substances into the air and water. On Jan. 27,

HOECHST (01/27/96)

Five workers were injured, one seriously.

An environmental quality specialist with the state

the cloud of coloured smoke caused by the explosion dispersed.

treated for smoke inhalation. Police advised people in the area to stay indoors and keep doors and windows shut, while

Friends of the Earth called for an inquiry into the incident. None of the injuries were serious, but six reghters were

into the atmosphere. The company would not comment on how toxic the cloud of smoke was. Environmental group

police to close several major highways in the area and issue warnings to stay away. The black smoke erupted 200 feet

The explosion in a phosphate storage area lasted about three hours and caused emissions of hydrogen chloride, prompting

skyward.

there were two more blasts. The initial explosion occurred at 10 a.m., sending smoke and ames hundreds of meters

The re, emitting thick black smoke, was extinguished 90 minutes after the rst explosion. Within the next 40 minutes

ditches after the tank ruptured.

Department of Environmental Quality, said the o-site impact was limited to contamination in nearby storm drainage

miles above the plant.

in a wastewater tank. The explosion triggered a large re, sending plumes of thick, black smoke that could be seen for

In an afternoon explosion and re at the Witco Corp. plant in Taft after a spark from a torch apparently ignited materialof the accidents.

Environment Ministry, a state government body, ordered sections of both plant to be shut down pending an investigation

then reported the incident to the city. In a third incident, an employee was seriously injured on Jan. 30. The Hesse

that incident for 34 hours, according to a Hoechst spokesman, before notifying the company re department, whichthat contained cancer-causing substance isoproturon spread to a nearby community. Production workers failed to reporta lid blew o a large vacuum dryer, ripping a hole in the roof of the Griesheim plant. A cloud of white toxic powder

A chemical tank plant exploded at Japan's largest chemical company killing one worker. No other workers were injured.

One man was listed in critical condition. Five workers were listed in fair condition.

series of explosions at the AK Steel Corp. Middletown (Ohio) Works injured 13 workers, six of whom were hospitalized.

The explosions occurred in an area that had been shut down for maintenance. One employee was in critical condition. A

formed more than a trace of hydrochloric acid vapor.

leak posed no danger to the community. Emergency crews contained the colorless liquid at the chemical plant before it

The chemical leak forced about 30,000 residents indoors in ve communities and closed several roads for two hours. The

pains.

Services Director said most of those exposed to the vapor complained of nausea, burning eyes, irritated throats and chest

plant, but none was believed critically injured. The plant and surrounding areas were not evacuated. Emergency Medical

Eighty construction workers at Lyondell-Citgo Rening Co. were taken to area hospitals after a chemical leak at the

1,500 people in four Kentucky towns following gas leak at Du Pont chemical factory in Wurtland.

for exposure to chemical. The U.S. Environmental Protection agency proposed the ne. Ocials report evacuation of

MITSUBISHI CHEMICAL (12/29/95)

AK STEEL HDG. (12/05/95)

FMC (12/05/95)

LYONDELL CHEMICAL (11/21/95)

DU PONT DE NEMOURS (08/20/95)

27

Hundreds of people around a lithium plant returned to their homes early.

It mixes with water, it forms

Six people were hurt.

None of the

The accident occurred at an insecticide production facility.

BAYER (06/08/99)

BP (10/06/00)

BP (06/07/00)

ROYAL DUTCH PTL. (03/23/00)

A re broke out at a feed-manufacturing plant. No harmful chemicals were released. There were no injuries.

SUMITOMO CHEM. (12/23/98)

chemicals used are described as "very toxic", others as "dangerous for the environment" or "extremely ammable ".

A leak of liquied petroleum gas at the catalytic cracker starts a major re. Steel workers were evacuated. Some of theover the years.

complexes has a notorious safety record with four workers killed and several more severely injured in explosions and resdeafening roar that lasted for an hour. An investigation was underway. Grangemouth one of Europe's largest industrial

Tonnes of earth, insulation and lumps of metal were hurled onto a main road when a steam pipe exploded, causing apollution occurred.

eyes and breathing diculties, measurements by a renery team and state environmental experts said no dangerous

for several hours. While some people at a nearby shopping center and residents close to the plant complained of irritatedbroke out, sending a cloud of smoke 300 meters (1,000 feet) into the air and over a nearby autobahn, which was closed

A re at Royal Dutch/Shell's 170,000-barrel-a-day Godorf renery in Germany. No one was injured in the inferno thatsays it released toluene.

No serious injuries were reported. Bayer says the explosion posed no public risk, but the German environmental agency

individuals living nearby were treated at a local hospital for respiratory ailments and eye irritation; all have been released.

of illness or eye or respiratory irritation caused by escaping fumes from burning toluene. Thirty Bayer workers and 20

Local environmental group Coordination Against Bayer Dangers (CABD) is suing Bayer. 100 local residents complaining

authorities have conrmed that the escaping fumes did not contain constituents at levels that were damaging to health.

The environmental

The investigation foundthat the explosion resulted when employees added the wrong chemical to a compound in a vat.

in neighbouring houses and residents were advised to remain indoors with windows closed.

eye or respiratory irritation caused by escaping fumes from burning toluene. The force of the explosion broke windows

It left about 100 local residents complaining of illness or

Idem.

Polyethylene production.

irregular gas pressure. Sending smoke and ames hundreds of meters skyward. Eight people were injured, one seriously.

The explosion may have been caused by the release of ethylene gas through a defective safety device designed to react toshut the plant down for the holidays. Two other workers were injured in the blast. They were in stable condition.

pounds of nitrogen per square inch blew when a maintenance crew was changing its seals. Workers were preparing to

An explosion ripped through a metal-fabricating plant, killing eight employees. A pressurized bottle with about 5,000

injuries, all employees or contractors, is life-threatening.

A tank of paint solvent, Heptane, caught re and exploded at a chemical plant.

FMC/Lithium can pinpoint the accident's cause.

lithium hydroxide, which is not toxic but is an irritant. The part of the plant that caught re won't be reopened until

measure.

The smoke contained no

The evacuation was ordered as a precautionary

About 350 people living within a half-mile of the plant were evacuated.

detectable toxins, and the evacuation was ordered as a precaution.

reactive chemical.

The explosion occurred in a chemical mixing vessel that contained heptane, which is dangerous because it is a water-

MITSUI CHEM. (04/04/97)

DU PONT DE NEMOURS (04/04/97)

WYMAN GORDON (12/22/96)

FMC (12/04/96)

FMC (11/17/96)

28

Fire broke out at renery following two explosions. Production was halted at nearby units and a security cordon was

MARATHON OIL (01/12/03)

The cyclohexane leak occurred on 17 December in a pipe linking two plants.

RHODIA (01/08/03)

case of possible exposure to harmful chemical fumes.

some homes and cars in the immediate area, appeared to frighten a number of residents who rushed to the hospital in

The cause of the re was unknown. There were no injuries. Nobody was hurt, but the blaze, which dropped soot ontransformer caught re. Marathon's air monitoring crews did not nd any pollution in neighborhoods around the plant.

Fire broke out at a renery and burned for more than four hours in the plant's crude oil unit. A malfunctioning electric

spokeswoman said a rm that specialises in cleaning up polluted sites was hired to undertake this operation.

the 8/01/03. An operation to recover leaked cyclohexane at its polyamide intermediate plant is currently underway. A

The leak was divulgated to authorities

Une violente déagration s'est produite dans une cuve de fabrication de de dichloro dicyanoquinone.

factory owned by Asahi Kasei for production of pharmaceutical products on Jan. 29.

re. Analyses could take over one week. According to the Nobeoka re department, there was a small re at anotherdecided to conduct air and water quality checks to verify if any toxic substances, such as dioxins, were emitted by theplant has 11 liquid-level gauges that contain cobalt 60, a radioactive substance. The Miyazaki prefectural government

Order to evacuate a total of 4,861 people living near the factory due to toxic gases emitted from the re. The Asahi Kasei

from the massive explosion.

of lawsuits could eventually run into the thousands. The Lloyd's market is expected to face a net claim of around $50m

investigating the Sept. 21 explosion say it was an accident, destroyed or damaged over 10,000 homes. The total number

Grande Paroisse fertilizer plant in Toulouse in southwest France kills 30 people and injures 200 more. National authorities

An explosion in a storage hangar in which 300 tonne of ammonium nitrate granules were stored for recycling at Atona's

and spread a yellow haze

injuring at least nine. An estimated 2,000 people were evacuated immediately after the 25,000-gallon rail car exploded

exact cause of the explosion was still uncertain. Residents have launched a class-action suit. Killing three employees andpeople were evacuated immediately. Repeated exposure can lead to paralysis, severe breathing problems and death. The

A railcar containing loaded with methyl mercaptan, a dangerous chemical, exploded at the factory. An estimated 2,000

n'a pas provoqué de pollution, a indiqué Marc-Laurent Boutin, ingénieur de permanence à l'usine Rhodia.

à Chalampé dans le sud du Haut-Rhin. Aucune explication n'a été donnée sur les causes de cette explosion. L'accident

ont été blessées, dont une grièvement, à la suite d'une explosion hier en n d'après-midi à l'usine chimique Rhodia, située

GUERBET (09/03/02)

ASAHI KASEI (03/12/02)

TOTAL (09/21/01)

TOTAL (07/14/01)

Three people were injured after an explosion at Rhodia's factory here, reghters at Colmar said. The factory has not

RHODIA (04/25/01)

halted production and output tomorrow will be normal. No explanation for the accident was provided.Trois personnes

An explosion occurred at a utility steam boiler at the petrochemical complex of Exxon Chemical Singapore.

injuries. Eleven people were injured in the re.

employees and several reghters were treated at a local hospital for smoke inhalation and one employee for minor

A vat of hot liquid resin exploded. No environmental damage was caused, and local community was not aected. Six

placed around the industrial zone at Le Havre port.

EXXON MOBIL (12/09/00)

SOLUTIA (10/12/00)

TOTAL (09/03/00)

29

LG PETROCHEMICAL (08/25/04)

CROMPTON (06/11/04)

BP (03/31/04)

LONZA GROUP (02/22/04)

REPSOL YPF (08/14/03)

DSM (08/13/03)

EXXON MOBIL (02/21/03)

The company is an aliate of LG

Group and the leader in a basic process of the petrochemical industry known as cracking.

the factory after the re broke out a line producing benzene, toluene and xylene.

worker was hospitalized, but not in critical condition. There was a loud explosion and thick clouds of smoke came fromat South Korea's LG Petrochemicals' butadiene line killed one plant worker and seriously burned another. The injured

triggered by a malfunctioning of a valve. The explosion blew out windows of houses up to 300 meters away. The explosion

still underway to determine the full cause of the explosion, but preliminary inquiries revealed the blast could have been

A loud explosion and thick clouds of smoke came from the factory after the re broke out a line. Investigations wereGrand River.

ocial said there was no danger posed to Canagagigue Creek, which ows beside the Crompton property and into thestorage tank exploded and burst into ames at a chemical plant. "It's not a toxic chemical." An Environment Ministrytank. A plume of black smoke hung over, forcing residents in the town of 8,200 to stay in their homes after a wastewater

250 employees were evacuated. Cloud of black smoke. No injuries in the blaze. The explosion occurred in an oxygen

homes. No danger posed to Canagagigue Creek, which ows beside the Crompton property and into the Grand River.

re at a giant chemical plant. A plume of black smoke hung over forcing residents in the town of 8,200 to stay in their

A wastewater storage tank exploded and burst into ames at a chemical plant. Fire crews spent a day to contain thecontained, and there was no danger of it spreading, but no injuries were immediately reported.

shut for about two hours after the re began. Roads leading into the complex were closed as a precaution. The re wasplans were ordered evacuated as a precaution, while residents were asked to remain indoors with all windows and doors

Several massive explosion rocked a Texas, renery at night forcing the evacuation of the plant. Other area industrial

will soon resume. No sign of a danger of pollution or poisonous fumes, the police said.

company maintained that there was no damage to the nearby environment. Nine people were slightly injured. Production

smoke emission was visible from the surrounding area and foam used to extinguish the re was observed. However, theProduction at Lonza Holding AG's Viege site should resume "shortly" after a water tank exploded. A are and heavy

say this does not pose any health risks.

were condent there was no pollution risk for the area. Caused a plume of smoke 500 metres high, but the authorities

and the renery remains shut. One of Spain's worst ever rening accidents. As the burning fuel was lead-free ocials

workers, while four others still remain in a critical condition. Repsol is currently investigating the cause of the accident

A two-day re at a 140,000-bpd Repsol renery at Puertollano, south of the capital, Madrid, has claimed the lives of six

immediately known. An environment ocial said there appeared to be no threat to the surrounding area.

plant outside Linz, northern. None of the injured were in a serious condition and the causes of the explosion were not

was no danger for the environment. The explosion injured 17 people, including two seriously, in a Dutch-owned chemical

The explosion went o at about 11 a.m. Company spokesman said it wasn't yet clear what caused the explosion. Theredamage to the environment.

injured U.S. Coast Guard ocials said that any unburned gasoline would evaporate quickly and cause no permanent

injured and two others unaccounted for. Killing two workers on the barge. Another worker at the facility was seriously

the air. A powerful explosion ripped through an oil storage terminal on the edge of Staten Island, Leaving one people

to the 3 million bbl facility. The explosion left the oil facility ablaze, sending thick black smoke hundreds meters into

Operator of the Staten Island Port Mobil oil product transfer terminal, a 100,000 bbl barge caught re while ooading

30

The

The possibility a car's ignition caused the blast in the plant's isomerization unit, which boosts octane levels in gasoline.

BP (03/23/05)

Witnesses have told investigators there was a hydrocarbon liquid and vapor release that fell to the ground

moments before the powerful explosion, which shot ames, ash and blackened metal into the sky and was felt miles away.

in place.

volatile organic compounds have been detected in the air, but that monitoring of air quality around the facility remains

its personnel before and during the start-up of an isomerisation process unit. BP says no asbestos, benzene, or otherkilling 15 contract workers and injuring more than 170 people. BP attributed the explosion to a series of mistakes by

The renery is BP's largest in the U.S. and the country's third largest. Explosion and re hits BP's Texas City renery,Une pompe électrique d'une unité de péroxyde d'azote en phase de démarrage a explosé.

to the olens facility.

at the time of the blast, this statement was dicult to reconcile with reports that very serious damage has been caused

eight and two workers remain in intensive care. Although the ethylene plant was undergoing a maintenance turnaroundnumber of deaths from the explosion at South African energy rm Sasol's Secunda petrochemicals complex has risen toby the inuential trade union movement that the rm change its practices and do more to protect its workers.

after three deadly blasts at its operations since June. The recent spate of accidents at Sasol facilities and growing callsof gas which ignited while the plant was undergoing routine maintenance. Sasol's safety record is under the spotlight

The blast at the Sasol Polymers ethylene facility (Sasol is the world's largest coal-to-fuel producer) was caused by a cloud

YARA (01/04/05)

SASOL (09/01/04)