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Product recalls, corporate social responsibility, and firm value: Evidence from the Chinese food industry

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  • Kong, Dongmin
  • Shi, Lu
  • Yang, Zhiqing

Abstract

Product recalls frequently occur in the Chinese food industry, which is closely linked to public health and social security and attracts significant attention from the government, media, and public. We manually collect food recalls from listed firms in China from 2008 to 2016 and use an event study methodology to investigate the economic consequences of product recalls. First, we find that product recalls result in significantly negative abnormal returns for listed firms. Second, the level of corporate social responsibility (CSR) mitigates the negative effect of food recalls on the wealth of shareholders. Our results are robust to different specifications and measures. This study provides timely evidence and important policy implications for the ongoing food safety crisis in China. The government should release appropriate policies to improve firms’ product quality and activities on CSR in the food industry, which in turn helps the firms obtain benefits.

Suggested Citation

  • Kong, Dongmin & Shi, Lu & Yang, Zhiqing, 2019. "Product recalls, corporate social responsibility, and firm value: Evidence from the Chinese food industry," Food Policy, Elsevier, vol. 83(C), pages 60-69.
    • Handle: RePEc:eee:jfpoli:v:83:y:2019:i:c:p:60-69
    DOI: 10.1016/j.foodpol.2018.11.005
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