The impacts of compulsory food liability insurance policy on stock price crash risk: Evidence from Chinese food industry

Zhiqing Yang and Xiaowen Liu

Finance Research Letters, 2022, vol. 50, issue C

Abstract: Food safety liability insurance is a way to alleviate financial crisis such as stock price crash when food safety incident occurred. This study evaluates the causal effects of compulsory food safety liability insurance on stock price crash risk. Results from our difference-in-differences estimator show that firms enforced compulsory food liability insurance are less likely to suffer crash risk. We also find that the negative effects of compulsory food liability insurance on crash risk are mediated through constraining overinvestment to enforced firms. Our study suggests the importance of cooperation between government legislation and insurance agencies oversight in food safety protection.

Keywords: Compulsory food safety liability insurance, Crash risk, Information asymmetry, Moral hazard, Overinvestment; JEL: G38; G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004275

DOI: 10.1016/j.frl.2022.103232

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