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Regulation and the financial performance of Canadian agribusinesses

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  • Brandon Schaufele
  • David Sparling

Abstract

Purpose - The purpose of this paper is to investigate the relationships between regulatory changes, returns on equity and stock market valuations for Canadian food and non‐food agribusinesses. Design/methodology/approach - Two empirical approaches are employed. First, an event study is used to evaluate the impact of official regulatory announcements on the stock market valuations of selected Canadian agribusinesses. Next, an approach introduced by Mishraet al.using the Du Pont expansion is applied to investigate the effect of regulations on firms' accounting profits. Data on Canadian food and non‐food agribusinesses are collected from Bloomberg, Thompson One Banker and SEDAR. Findings - The event study demonstrates that official regulatory announcement dates do not correspond with abnormal stock market returns for Canadian firms, while the Du Pont model yields mixed evidence with respect to their accounting profits. Research limitations/implications - This paper only considers publicly traded companies. As a result, survivorship bias may exist. Future research should include privately held and cooperative firms. Social implications - Food regulations can influence firm profits and shareholder wealth, so understanding how government actions influence agribusiness is important when considering the total costs of current and future food policy. Originality/value - The interaction between policy and the financial performance of Canada's publicly traded agribusinesses is an under‐researched area and no studies have examined Canadian data. The results of this study are valuable to both policy makers and researchers.

Suggested Citation

  • Brandon Schaufele & David Sparling, 2011. "Regulation and the financial performance of Canadian agribusinesses," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 71(2), pages 201-217, August.
    • Handle: RePEc:eme:afrpps:v:71:y:2011:i:2:p:201-217
    DOI: 10.1108/00021461111152573
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    References listed on IDEAS

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    1. Calum G. Turvey & Linda Lake & Erna van Duren & David Sparling, 2000. "The relationship between economic value added and the stock market performance of agribusiness firms," Agribusiness, John Wiley & Sons, Ltd., vol. 16(4), pages 399-416.
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