This study empirically examined whether abnormal stock returns exist for firms that were caught by the Ministry of Environment for discharging pollutants exceeding standards and subsequently reported in newspapers. The sample for analysis consisted of 103 cases involving 75 companies that were caught and reported in daily newspapers during 1989 and 1990. The event study methodology was employed as the analytical method. The analysis revealed a significant abnormal stock return of -0.402% on day -1, the day before the violation was reported. Additionally, it was confirmed that the magnitude of abnormal stock returns had a significant positive relationship with the severity of penalties affecting cash outflows. These research findings imply that general investors trust the government's pollution prevention regulations. Since violation reports constitute negative news for investors, the findings suggest that violation facts should be immediately disclosed to the stock market. From the perspective of corporate accounting standard-setting, these research results indicate the need to distinguish pollution prevention investment expenditures from general investment expenditures and include them in financial reporting. Furthermore, the need to recognize anticipated expenditures as contingent liabilities by evaluating the probability of detection is also raised.