Market Incentives for Safe Foods: An Examination of Shareholder Losses from Meat and Poultry Recalls

13 Pages Posted: 24 Mar 2020

Date Written: August 2001

Abstract

Meat and poultry recalls, while voluntary, are carried out under governmental oversight. If firms have financial incentives to avoid being implicated in a recall situation, governmental involvement in recalls may cause firms to internalize social costs when making investment decisions concerning food safety controls. To examine these incentives, we analyze federally supervised meat and poultry recalls from 1982 to 1998 within an event study. Results show significant shareholder losses when publicly traded food companies are implicated in a recall involving serious food safety hazards. We find no evidence that the stock market reacts negatively when recalls involve less severe hazards.

Keywords: event studies, food policy, food safety, product recalls, stock prices, D180, G140, Q180

Suggested Citation

Thomsen, Michael R. and McKenzie, Andrew M., Market Incentives for Safe Foods: An Examination of Shareholder Losses from Meat and Poultry Recalls (August 2001). American Journal of Agricultural Economics, Vol. 83, Issue 3, pp. 526-538, 2001, Available at SSRN: https://ssrn.com/abstract=3558573 or http://dx.doi.org/10.1111/0002-9092.00175

Michael R. Thomsen (Contact Author)

University of Arkansas ( email )

Fayetteville, AR 72701
United States

Andrew M. McKenzie

University of Arkansas

Fayetteville, AR 72701
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
59
PlumX Metrics