The impact of Americans with Disabilities Act (ADA) events on firm value

Abstract

To date, no research has examined the impact of events related to the Americans with Disabilities Act (ADA) on the value of firms with publicly traded equity, despite the importance of this legislation to the economic and legal environments of business. To examine the impact of the ADA on firm valuation, we analyse ADA-related media events associated with publicly traded firms. We find that the effects of ADA-related events are concentrated in the retail industry, where firms interact more frequently with the public. We find some evidence that positive events result in positive cumulative abnormal returns, but we do not find corresponding returns for negative events. Furthermore, we show that returns accrue to firms with positive ADA events, irrespective of firm size.

Keywords:

• event study
• Americans with Disabilities Act
• market efficiency
• asset pricing

JEL Classification:

• G14
• K40
• G12

Notes

¹ As an example of the costs related to complying with ADA events, the Kum & Go convenience store chain recently agreed to spend millions of dollars to make changes at more than 400 stores in 11 states to settle a lawsuit alleging that its gas stations failed to comply with the Americans with Disabilities Act (Rapid City Journal, 2 November 2014, page E4).

² Results are similar if we include the Carhart (1997) momentum factor.

³ Results are similar using different approaches to calculate t-statistics including the t-statistic proposed by Brown and Warner (1985).