![handle is hein.journals/eurjlwec5 and id is 1 raw text is: European Journal of Law and Economics, 5:5-12 (1998)
© 1998 Kluwer Academic Publishers
Guilty by Association? The Case of The Karin B
Scare
ANDREW COOKE
Dept. of Economics and Politics, The Nottingham Trent University, Burton Street, Nottingham, NG] 4BU UK,
email: andycooke@ntu.ac.uk
WENDY CHAPPLE
Dept. of Economics and Politics, The Nottingham Trent University, Burton Street, Nottingham, NG 4BU UK,
email: wendychapple@ntu.ac.uk
Abstract
The waste disposal industry is susceptible to bad publicity owing to the nature of the products it is sometimes
required to process. At particular risk are companies which treat and dispose of hazardous substances. In this
paper we test whether media concerns about public safety arising from the international transfer of hazardous
wastes can have a negative impact on the stockmarket valuation of firms and of the waste disposal industry as
a whole, even when the affected companies have not themselves broken the law.
Keywords: Adverse publicity, event study, hazardous waste, Karin B, waste disposal
JEL Classification: G14 (information and market efficiency; event studies)
With the governments of industrialised countries strengthening their legal commitment to
the environment, developing economies became the recipients of a growing transboundary
trade in hazardous wastes as waste producers searched for less costly disposal sites. A
more sinister trend emerged during the 1980s which saw a series of reported incidents in
which hazardous wastes produced within industrialised countries had been dumped un-
lawfully in developing countries. A notorious case arose when a ship, the Khian Sea, left
Philadelphia in 1986 with 15,000 tonnes of municipal incinerator ash. The cargo was
described as non-hazardous, even though it could have contained hazardous materials.
After attempting to off-load its cargo in a number of Central American countries, the ship
re-emerged off the coast of Singapore in November 1988 with an empty hold and a new
name (the Pelicano). With the Khian Sea's cargo having been also 're-described' three
times after leaving Philadelphia, the incident raised a whole series of questions about the
labelling, description and transboundary dumping of hazardous waste.
One of the difficulties associated with establishing a formal legal framework to regulate
the disposal of hazardous waste is that there is a lack of a universally agreed definition of
which substances should be deemed as 'hazardous' (see Sands (1995) p457-8). Even at
national level, problems can arise within definition-driven regulatory schemes, a factor
which can lead to uncertainty and litigation. Nevertheless, there has emerged a body of](ViewImageLocal?handle=hein.journals/eurjlwec5&div=1&collection=&method=preview&ext=.png&size=3)
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