The Fukushima Nuclear Accident, Damage Compensation Resolution and Energy Stock Returns

Abstract

In this paper, we investigate both the market reaction soon after the accident and the market reaction when the Nuclear Damage Liability Facilitation Fund Act was passed and signed into law. TEPCO, the damaged electric power company’s stock price lost the largest consecutively for direct damage of its nuclear plants in Fukushima. Nuclear construction stock prices dropped soon after the accident. And significant contagion effects spread to non-damaged regionally monopolistic electric power and nuclear construction stocks, as worse information arriving. Non-damaged power companies’ subsidiary suppliers gained in stock prices. Competitive effects occur for alternative energy companies and their stock prices gained from the accident. Also, the market believed the primary beneficiary of the original bill of the Act was TEPCO which was bailed out. In contrast to the original bill’s positive effects on all electric power companies, the revision of the bill had negative impacts on TEPCO, nuclear operators and non-nuclear electric power companies. Finally, we discuss the relationship between liability compensation regime and nuclear safety incentives.

Keywords: Nuclear accidents, Fukushima-Daiichi, TEPCO, Energy policy, Contagion effects, Competitive effects

JEL Classification: G14, G12, G15, Q48, Q54, G38