韩国裸舞

No茅mie Bucourt

University of Toronto

Real Effects of Personal Liability:
Evidence from Industrial Pollution

Date: Friday, February 7, 2025
Time: 10:30 AM - 11:45 AM
Location: Bronfman building, Room 301

All are cordially invited to attend.

Abstract

This paper studies how imposing personal liability on directors and executives can mitigate corporate environmental externalities. I use a landmark court case that increased perceptions of out-of-pocket liability risk related to corporate releases of toxic chemicals. This change varied across Canadian provinces based on their legal systems, which I exploit in a difference-in-differences analysis. I find that imposing personal liability leads to a 23% reduction in toxic chemical releases. Treated small firms scale down operations while large firms invest in clean technology. This environmental benefit is accompanied by a 2.6% decrease in abnormal returns following the shock, as well as an increase in director turnover, particularly among the wealthiest directors and environmental experts who are the most exposed to liability risk. These findings contribute to the debate on the optimal level of personal liability to regulate corporate externalities.