Bans on eating and drinking: What do investors think?

Chuanxi Zhang, Chih-Chun Chen, Lan Gou and Yuan-Teng Hsu

International Review of Economics & Finance, 2024, vol. 96, issue PB

Abstract: This study examines the stock return responses to the declaration by the Chinese government of five restrictions on the drinking of alcohol. We propose that a teetotal effect occurred when the stock returns of alcohol companies dropped after these announcements. We classify alcohol companies into those that produced Chinese liquor and those that produced non-Chinese liquor and argue that Chinese liquor was more seriously affected by the restriction than non-Chinese liquor. We further classify Chinese liquor into top- and bottom-quality Chinese liquor. Through our analysis, we observed distinct patterns in the stock returns of these companies over different time periods. First, our results indicate the existence of a teetotal effect on the event day, especially for top-quality Chinese liquor. Next, the abnormal returns became positive in the days following the event, varying between the second, third, and fourth days. Finally, the returns show a mixed pattern for an even longer time window. We then explain these observations. The first negative effect was a result of the market shocks from the news; then Chinese investors believed that the demand for high-quality Chinese liquor would not be reduced because of the endurance of the drinking culture of China. Finally, people accepted the restrictions.

Keywords: Teetotal effect; Contagion effect; Alcohol companies; Chinese liquor (search for similar items in EconPapers)
JEL-codes: G11 G14 G18 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056024006257
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pb:s1059056024006257

DOI: 10.1016/j.iref.2024.103633

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().