Research On The Intra-Industry Effects Of Scandal And Its Influencing Factors

After the "Weizexi Scandal" occurred in 2016,the relevant state authorities not only conducted a thorough search on Baidu Company,other Internet companies have also been checked.In 2017,the "Child Abuse Incident of Red,Yellow and Blue Kindergarten" has led both the authorities and the public pay attention to not merely the focused kindergarten,but peers as well.All of these suggest that the exposure of a scandal is likely to affect not just the one involved,but also its competitors in the same industry.As for the listed companies,the scandal not only caused a significant decline in the stock price of the enterprise,but also caused abnormal fluctuations in the stock prices of its competitors in the same industry.Are such fluctuations beneficial or unfavorable to other firms?On one hand,the exposure of a corporate scandal may make consumers and investors suspicious of the entire industry,which is so called the contagion effect.On the other hand,the exposure of a single enterprise's scandal creates opportunities for its competitors to develop and grow.In this case,investors may switch to investing in other companies,resulting in the competing effect.Which of these two effects is dominant?What factors would affect this answer?With the curiosity of these problems,this paper carries on a series of explorations.Based on the study of the extant literature,this paper introduces its own theoretical hypotheses from many aspects,including the relative and absolute status of the enterprise,the responsibility attribution of the scandal,the number of faculties,the transparency of the enterprise,the state-owned control intensity and industry scale and other angles.Then,the cumulative excess return rate of non-incident enterprises in the event period is calculated using the event research method.Then,according to the assumptions put forward,the corresponding data are collected and processed,and finally the conclusions are drawn.Further for the enterprise managers and investment public some advice is provided.The contributions of this paper lie in as follows.Firstly,this paper fills the gap of research and enriches the theoretical and empirical research on scandal and industry effects.Secondly,to link the concept of firm status with its contagion effect or competition effect explores this topic more deeply,and enriches the theoretical and empirical research on the firm status.Thirdly,from views of the nature of scandal,the enterprise and the industry,this problem is analyzed theoretically and empirically,and this thesis is introduced and expounded in a more comprehensive way.The shortcomings of this paper are as follows.First,in the use of event study method,although interference factors have been eliminated as far as possible following authoritative research methods,the results are still inevitably affected by other factors.Secondly,when analyzing whether enterprises are affected by contagion effect or competition effect,because the data sample is large,it is not possible to analyze whether the reason of excess returns is necessarily caused by scandal.Finally,there are a number of other factors affecting the industry effects of scandal events that can be further explored.