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Southern University College of Business E-Journal

Abstract

The economic consequences of a First Nations response to Enbridge and the voicing of concerns over the violation of human rights resulting from the proposed Northern Gateway pipeline are examined. Despite overwhelming opposition and contrary to indigenous rights, the proposed pipeline was to cross more than 50 territories claimed by First Nations. The pipeline would transverse through unique ecosystems that are home to endangered species, and tankers would travel through one of the largest undeveloped temperate rainforests in the world. Given Enbridge’s history with oil spills and environmental violations, potential future oil spills are a serious concern. Because of these concerns, stakeholders have engaged in historical displays of activism. This study examines the unprecedented termination of this project given pressure from Enbridge’s stakeholders and, in particular, the Indigenous peoples involved. The economic consequences of stakeholder activism events during a seven-year period are analyzed for abnormal stock returns (AAR) around announcement dates using the Fama and French (1993) three-factor model. The results indicate that the market reacts negatively to human rights violation risk and environmental risk. The study provides evidence that the market factors these risks into its investment decisions, providing the impetus for accounting standard setters to mandate human rights violation and environmental risk disclosures. Furthermore, this study contributes to the evolving and emerging global business norms, regulatory requirements, and worldwide accounting reporting standards in terms of disclosing and accounting for indigenous rights violations and environmental risk.

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