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STOCK MARKET REACTION TO NUCLEAR REACTOR FAILURES
Author(s) -
ROTHWELL GEOFFREY S.
Publication year - 1989
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1989.tb00571.x
Subject(s) - sanctions , business , nuclear power , equity (law) , finance , portfolio , financial market , stock market , economics , ecology , paleontology , horse , political science , law , biology
Current proposals to reform regulation of the commercial nuclear power industry ignore the potential of financial market sanctions on poor reactor management. This paper examines investor reaction to the automatic shutdowns following equipment failures at nuclear power plants from 1978 to 1985. Compared with a portfolio of nuclear utilities, the daily return to common equity of the owner of a failed reactor dropped by 0.24 percent after two trading days but increased by 0.24 percent four trading days later. Investors are averse to reactor failures but correct initial negative responses once they learn that the reactor is not damaged.