Analysis of the Impacts of Environmental Accidents in Mariana and Brumadinho on Vale's Shares

Abstract

In November 2015, the Fundão dam owned by mining company Samarco, located in Mariana (MG), and controlled by the companies Vale and BHP Billiton Brasil, failed and caused the leakage of industrial tailings. In January 2019, dam 1 of the Mina do Córrego do Feijão, owned by Vale in Brumadinho (MG), also failed and dumped millions of m³ of mining tailings into the environment. Incidents like these have several consequences for society, and one of them is the way the financial market reacts to this type of event, especially in the case of a company that has shares on the stock exchange. Given this, the study evaluated the Vale reaction to the accidents, in the Brazilian capital market. As a method, we used an event study, with two event windows, one of 100 days before and after the accidents, and another of 200 days before and after the accidents, to assess the impact of the events on the company's stock price. Results showed that, in both cases, Vale's shares were negatively impacted by environmental accidents and suffered a drop in their prices in the short term and recovery in the long term. Comparing the results, the Brumadinho accident led to a more accentuated fall in the price of shares, however, the Ibovespa did not follow it as it did in the case of Mariana.