252 / 2024-04-23 20:53:30

Responsible Food Safety Incident Management: Timeliness, Transparency, and Taking Action

food safety, crisis management, firm responsibility, event study

Food safety incidents present serious risks to public health and can lead to significant fallout for involved companies. Therefore, it is imperative to enact responsible food safety management strategies to mitigate negative sentiments and restore stakeholder trust. This study examines the stock market reactions of firms within food-related sectors in the aftermath of food safety incidents. More crucially, it explores whether the adoption of responsible food safety management strategies - namely timeliness, transparency, and taking action - can alleviate the negative market response. We gather data on food safety incidents from listed Chinese firms and conduct an event study analysis. We observe significant negative stock market reactions following a food safety incident. Daily abnormal returns within a 21-day time window are utilized for a difference-in-difference analysis. The findings reveal that a firm’s response could alleviate the negative impact, with responses that are timely, transparent, and include concrete actions being preferred. Moreover, we investigate adjustments made by firms in their management systems and supply chains following food safety incidents, considering these as a long-term responsible management strategy. The findings contribute to our understanding of product safety and crisis management by demonstrating that responsible incident management can help alleviate adverse consequences.