INFORMATION AS REGULATION - THE EFFECT OF COMMUNITY RIGHT-TO-KNOW LAWS ON TOXIC EMISSIONS

There is growing academic and policy-level interest in the use of info rmation as quasi-regulatory mechanisms, such as toxic release inventor y (TRI) and ''green labels.'' Mandatory disclosure requirements have b een touted as ''market-based incentives'' that may affect firm behavio r. We provide new evidence on the effectiveness of disclosure requirem ents by examining firm behavior in response to disclosures of TRI emis sions. We find that firms with the largest stock price decline on the day this information became public subsequently reduced emissions more than their industry peers. This is consistent with the view that fina ncial markets may provide strong incentives for firms to change their environmental behavior. (C) 1997 Academic Press