Empirical Study On Impact Of External Product Quality Event On Company Capital Market Performance

Along with rapid economy development, the enterprise’ businesshas been on the rise. And consequent product quality incidents happenfrequently, which not only bring consumers irreparable damage andpain, and also at the same time bring huge losses and regret toenterprises.According to classification standard of product quality events byprevious scholars, this paper divides event into internal quality eventsand external quality events according to the body of product qualityevents is the enterprise itself or not. Internal events refer to that thequality event directly happen in the enterprise itself and are exposed bythe media and the press, thus causing consumer’s doubt and distrust.External quality events are due to quality problems of other companiesin the industry are exposed, thus causing consumers have doubt in theentire industry. These two kinds of product quality event are related toeach other. Generally, after severe internal product quality event, thegovernment agencies will be involved. Before the government definesthe event is a universal phenomenon or just a solo case, otherenterprises in the similar or same or related industry will suffer fromthe impact of external product quality event. But it usually doesn’t lastlong, because government agencies usually will soon release productquality report of the whole industry. In this way, whether productquality is good or not is the fact of iron. In addition to causing seriousdamage and threat to enterprise itself, external product quality eventhave negative effect on the whole industry. Take "melamine" event asan example, not only did Sanlu go bankrupt and be acquired by Sanyuan finally, but also the whole domestic dairy industryexperienced a long-period depression.By reading related literature, firstly, based on the game theory, thispaper studies the association between product quality and cost-pricingshould meet and puts forward the concept and causes of externalproduct quality events. Secondly, we respectively analyzed relationshipbetween quality management practice and enterprise performancebefore external product quality event as well as influencing model ofcompany performance after external product quality event on the basisof attribution. Then we came to the last empirical research part. In thefirst step, we applied paired sample T test and concluded that yieldfluctuation after external product quality event is bigger than thatbefore the event occurred. In the second step we calculated cumulativeabnormal returns caused by external quality events on the basis ofCAPM. In the third step, because there existed correlation relationshipbetween those selected control variable, we took factor analysis toreduce dimensions and got two common factors. In the fourth step,from the aspect of attribution, we chose wrong section index asdependent variable and the two common factors as control variablesand did regression analysis with cumulative abnormal returns.According to regression results, we got the relationship between eachvariable and cumulative abnormal return.