The Spillover Effects of Environmental Lawsuits on Industry Peers

We examine the spillover effects of high-profile environmental lawsuits on industry peers. We find that compared to control firms, industry peers experience a decrease in chemical releases after the lawsuits. Industry peers, especially those with a higher decrease in chemical releases, also experience a decline in financial performance, likely due to the increase in abatement costs. In addition, we find that industry peers increase their disclosures related to pollution. Lastly, we confirm that industry peers experience an increase in negative reports on their environmental issues, corroborating that peer firms’ environmental litigation risk increases after industry leaders’ high-profile environmental lawsuits.