An Empirical Analysis Of The Impacts Of Food And Drug Safety Events On A-share Returns In The Stock Market

Since2008, China’s food and drug fields have experienced a series of negative events, suchas "melamine milk","clenbuterol","poison capsule" and "plasticizer". On the one hand, theseevents not only harmed the health of consumers and disrupted the market order, but also exposedthe greed of illegal business-owners and the lack of regulation in food and drug industries ofChina. On the other hand, these "black swan" events had an impact on related industries andenterprises of A-share market, brought serious consequence to investors of securities market.This paper explores respectively the influence of "poison capsule" event on the stock yield ofChina’s pharmaceutical industry and the impact of "plasticizer" events on the stock yield ofliquor plate by applying event study method. Research found that:(1) Using103listed pharmaceutical companies in the A-share market as samples, this papermakes empirical analysis of the pharmaceutical industry and pharmaceutical stocks respectively.first, the "poison capsule" event has outstanding influence on the A-share pharmaceuticalindustry, the effect, volatility and recovery speed are different during the enterprises whichproduce capsule preparation and enterprises which don’t, but all with lagging response; besides,the reaction of different pharmaceutical stocks to "poison capsule" event is different, in particular,the related stocks announced by the state food and drug administration are overreacted.(2) Using14liquor stocks of the A-share market as samples,"plasticizer" event has anadverse effect on the liquor plate of A-share market and yield rate of each liquor stock, theresponse of liquor plate to "plasticizer" event is sensitive but under-reaction; the responses ofdifferent liquor stocks to "plasticizer" event are different and under-reaction. In addition, it ispossible that the "plasticizer" event leaked out in advance.Through the research of "poison capsule" and "plasticizer" events’ effect on securitiesmarket and stock yield, the securities investor can make more reasonable investment decisions;the research is also good for government to formulate reasonable laws and policies in order toprotect the interests of the investors, maintain market stability and ensure food and drug safe andresidents’ health.