Market Response And Spillover Effects Of Food Safety Events

In recent years,with the improvement of people’s living standards continuously,KFC,McDonald’s and other Western fast food have sprung up everywhere,and even become the basic needs of a new generation of young people.But the food safety issues gave us a wake-up call.In interleaving money and interests,the unfair game in companies,vendors and farmers makes inroads on the interests of consumers.Throughout recently food safety incidents,although China’s current legal environment is slowly improving,the media report frequently,but the plans cannot keep up with changes."Food is the basic of the people,security is the basic of the food." With the development of China’s current situation,this article takes the "Fast Chicken" event in 2012 as the background and uses event study method and the theory of financial management.According to domestic and foreign research achievement,we review for food safety incidents which response to market research,spillover effect and analyze the causes and effects of incidents.Therefore,this paper proposes research hypothesis and selects 44 companies in food industry listed to conduct empirical research.After a large amount of data analysis,It proves that the food safety problem of listed companies affects the company’s performance and the behavior of investors,and then it is reflected in the stock market;in the short term,it is the fluctuation of stock prices of direct enterprises and related food industry companies related to the event,resulting in “infectious effect”.In addition,based on the previous research,this paper further analyzes the reputation effect,which indicates that the food safety incident has a great impact on enterprises with well-known trademarks and has a certain reputation effect.Finally,we make recommendations to stakeholders such as the government and enterprises on food safety event and find that food safety issues require multiple efforts to solve them.The specific research content of this paper is as follows:The first part is the introduction.Firstly,it expounds the policy background of the research,the general situation of food safety incidents and the brief introduction of the "Fast Chicken".We also analyze the research purpose and significance of this thesis.Secondly,we review of domestic and foreign research including four aspects: market response,spillover effects,consumption substitution and social responsibility.Then we determine the research content,research methods and technical routes.Finally,the innovations and shortcomings of this paper are proposed.The second part is the related notions and theoretical basis.On the one hand,it defines the relevant concepts such as spillover effects and reputation effects;on the other hand,it has a detailed introduction to the relevant theories such as the effective market theory.The third part is the review and follow-up treatment of the "Fast Chicken" event.It mainly includes industry background and company introduction,event development process and follow-up treatment.The event development process is analyzed from four stages: the event outbreak period,mitigation period,turning period and fading period.The fourth part is study design.According to the preliminary review of the "Fast Chicken" event,we first propose research hypotheses;and then select the sample,after the data source and screening conditions are determined,we select 44 sample of listed companies.Based on the previous research and event development,we fix 200 days for the estimate period and 41 days for the event period.The model setting mainly includes market rate of return,market model,normal rate of return,abnormal returns,cumulative abnormal returns.Based on the obtained data,we can do the data t-test.The fifth part is data processing and result analysis.After the regression processing of the data,we can explain the changes in the abnormal returns and the cumulative abnormal returns,and then determine the effectiveness of the information disclosure of the "Fast Chicken" event.We also analyze the impact of the event on the stock price of the food industry related companies and divide the sample into well-known trademarks and non-well-known trademarks in order to do the comparative analysis.The results are discussed after the statistical test.The sixth part is the research conclusions and policy recommendations.This paper draws the following conclusions:(1)This food safety event proves that China’s stock market is weakform market efficiency;(2)The occurrence of this food safety event proves that China’s stock market has spillover effects before and after the event,especially in the food and related industries.There has been a certain "contagion effect";(3)The food safety event indeed has a greater impact on enterprises with well-known trademarks,resulting in a reputation effects;(4)China’s supervision of food safety events needs to be improved.We also put forward relevant policy recommendations.For the government,it is necessary to improve relevant laws and regulations and improve the market environment of China’s securities market.For enterprises,they should improve their management and technical level and raise awareness of social responsibility.This paper not only enriches the existing research literature in theory,but also has important reference significance in practice.