Impact Of Product Safety Issues On Related Firm Financial Market Value In The Food Industry

With the heightened awareness of security and the coming of Web2.0era, therise of social media makes the information transmission time shortened, andinformation breadth of coverage also increased significantly. Exposure of variousproduct safety issues gets more and more attention by people. As a necessity inpeople’s lives, food safety issues attracted widespread attention. Since2004, theoutbreak of food safety crises in domestic woke sounded bell for many foodenterprises, enterprises should fulfill the basic responsibility to provide safe food,meanwhile, maximize their own interests.The Impact of Frequent occurrence of food safety incidents is not only limitedto the incident, but also the crisis will spread to companies in the same industry oreven non-incident related industries. As one innovation of this paper, this articleanalyzes the numerous food events and checks the impact of those issues on relatedfirm financial market value.This research carried out in the corporate point of view; analyze the impact offood safety issues reduce on the price of corporate stock. Modeling about therelationship between food safety issues and short-term stock price volatility, andresearch use the data of Food listed companies in China. Using the event studymethodology, the empirical test analyze direction and time interval of stock pricefluctuations, and select the abnormal return as main variable. The empirical analysisresults confirm that after the safety issues in same industry, the stock pricefluctuations indeed, and the direction is negative, that is, the stock price will fall.Basing on the results that stock price decrease in short-term, author establisheda model check the factors of stock price volatility, for finding the difference amongthe enterprises in food industry. First of all, the result of this part of empirical testshows that the higher Advertising expenditures the corporate can make, the less fallof its share price. In addition, we consider the business management strategy suchas marketing, charity donation and employee education as a consideration. Theresearch results did not confirm the income and employee education for marketinghave a significant effect on stock price fluctuations, but the charity donation has anegative impact on the fall of stock price.