Workshop Series: Accounting Area & Laidley Centre - Prof. Christian Leuz
Internalizing Externalities through Public Pressure: Transparency Regulation for Fracking, Drilling Activity and Water Quality
Presented by Christian Leuz
Distinguished Service Professor of Accounting and Finance
Booth School of Business, University of Chicago
Date: Friday, October 25, 2024
Time: 10:30 AM – 12:00 pm
Location: Armstrong Building, Room 255
All are cordially invited to attend.
Abstract:
Responding to the rise of hydraulic fracturing (HF) and its risks to water quality, U.S. states mandated disclosure for HF wells. We study whether targeting corporate activities with dispersed externalities with transparency reduces their environmental impact. We examine salt concentrations considered signatures for HF impact and find significant and lasting improvements in surface water quality between 9-14%, coming mostly from the intensive margin. We document that operators improve environmental performance, cause fewer HF wastewater spills and use fewer hazardous chemicals. Turning to how transparency regulation works, we show that it increases public pressure and enables social movements, which facilitates internalization.
