Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

Does Superfund Increase the Cost of Capital?

Published in: Journal of Environmental Economics and Management, v. 36, no. 3, 1998, p. 267-294

Posted on RAND.org on January 01, 1998

by Steven Garber, James K. Hammitt

Read More

Access further information on this document at www.elsevier.com

This article was published outside of RAND. The full text of the article can be found at the link above.

Superfund liability may impose financial risk on investors and thereby increase firms' costs of capital. The authors analyze monthly stock returns for 73 chemical companies using several measures of Superfund exposure. Additional exposure appears to increase costs of capital for larger firms, but perhaps not for smaller firms. From 1988 to 1992, they estimate an average increase in cost of capital for 23 larger firms of between 0.25 to 0.40 percentage points per year. The social cost of Superfund-related financial risk in the chemical industry may be as high as $800 million annually or enough to clean up about 20 sites.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.