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New Evidence on the Effects of Food Safety Recalls on Stock Prices

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  • Qi, Tao
  • Bovay, John

Abstract

This paper examines the stock market response to USDA Food Safety and Inspection Service (FSIS) Class I meat and poultry recalls affecting publicly listed U.S. firms over 2014– 2024, using four empirical approaches: an event study, an event study with interactions, and two staggered difference-in-differences estimators. While the cumulative average abnormal return is –1.49 percent, large recalls produce losses of –2.47 percent by day 20 after the recall announcement and product contamination recalls reach –4.0 percent by day 30, whereas small recalls and misbranding events carry no significant market penalty. The two staggered DID estimators yield directionally consistent but quantitatively different results, highlighting that the choice of empirical method affects estimated magnitudes. Applying multiple frameworks with distinct identification assumptions produces more credible evidence on the financial consequences of food safety failures and the market incentives for compliance.

Suggested Citation

  • Qi, Tao & Bovay, John, 2026. "New Evidence on the Effects of Food Safety Recalls on Stock Prices," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404545, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404545
    DOI: 10.22004/ag.econ.404545
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    References listed on IDEAS

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    2. Nicholas E. Piggott & Thomas L. Marsh, 2004. "Does Food Safety Information Impact U.S. Meat Demand?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 86(1), pages 154-174, February.
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