self-disclosure

environmental administrative penalty

penalty announcements

stock market’s reaction

event study

Environmental management

Policies for economically sustainable development

Policies for environmentally sustainable development

For a listed company the information about self-disclosing its environmental penalty will provide investors with reliable sources to observe its environmental situation. This study, employing the event study method, examines the stock market’s reaction before and after its environmental penalty announcement. The impacts of environmental penalties on companies’ abnormal returns during the observation period are evaluated as well. The findings reveal that the accumulative abnormal returns of penalized companies will drop before the environmental penalty announcements. Besides, selfdisclosing the environmental penalty will ease the negative impacts on their abnormal returns, and the disclosure of detailed rectification measures and the impacts of penalty in the announcements will increase their abnormal returns as opposed to bring further damage to their stock market returns. Our results suggest that the self-disclosure of penalty information prevents the decline of stock market returns, which implies that self-disclosure has a positive effect on companies’ reactions in terms of market value.