Did Plasticizer Event And Liquor Prohibition Event Damage The Investment Value Of Liquor Companies?

On November 19th,2002, "Jiu Gui Jiu" Company was disclosed that its plasticizer exceed 260%. After the announcement, the entire liquor industry’s stock price fell without exception. On December 24th,2012, "The ten regulations of CMC to strengthen self-style building" pointed that pomp activities in the reception work is not allowed, such as luxurious banquet, drinking, laying welcome carpet, laying flowers, organizing officers and soldiers lined up and so on. On that day, the liquor stocks fell sharply across the board dragged by liquor prohibition event. Only in a trading day, the Mao-tai’s circulation market value evaporated as high as 12.5 billion. In this context, capital market concerns the impact of plasticizer event and liquor prohibition event on the investment value of liquor industry widely. This is the original intention of this study.This paper studies the impact of plasticizer event and liquor prohibition event on the investment value of liquor listed companies. The sample is from liquor listed companies, and the industry code is C15. This paper uses event study and calculates cumulative abnormal return and buy-and-hold abnormal return to analyze.The paper first reviews the theories of market reaction of plasticizer event and liquor prohibition event and the theories of the investment value of listed companies. According to efficient markets hypothesis, we make three assumptions:First, the cumulative abnormal return of plasticizer event is negative. Second, the cumulative abnormal return of liquor prohibition event is negative. Third, plasticizer event and liquor prohibition event cause the buy-and-hold abnormal return decline.Then we collect stock price data of liquor listed companies, use event study method to analyze via EXCEL and SPASS. This paper calculates cumulative abnormal return by using market model and market-adjusted return model. This paper finds that after plasticizer event and liquor prohibition event, the liquor listed companies have obvious adverse reaction so as to verify the assumptions. Then this paper combines plasticizer event and liquor prohibition event to analyze the short-term and long-term impact. This paper finds that in the short-term, the impact of plasticizer event on the investment value of liquor listed companies is bigger than liquor prohibition event through cumulative abnormal return paired T-test. And in the long-term, plasticizer event and liquor prohibition event cause the investment value of liquor listed companies decline. This shows that the investment value of liquor listed companies reduce continually. So for the short-term investors, the investment advice is to sell their shares.Finally, this paper summarizes the conclusions and points that liquor industry must start from their own to solve the fundamental problem if they want to achieve healthy and sustainable development. On this basis, this paper proposes some suggestions to promote the development of liquor industry.