A Study On The Economic Consequences Of Listed Company Scandals

The history of world economic development proves that the capital market is an important part of the modern financial system.It has functions such as dispersing real economic risks and optimizing resource allocation.It is also promoting the adjustment and upgrading of industrial structure and enhancing the international competitiveness of national finance,leading economic development to be driven by innovation.It plays an important role in promoting economic transformation,quality change,efficiency change,and power change.With the explosive growth of the domestic capital market and the steady development of the international capital market,more and more listed companies have entered the public eye,the quality of market players varies,and the outbreak of scandals is becoming more and more frequent.The exposure of scandals such as "Master Kong Old Altar Pickled Beef Noodle","Changsheng Biological Vaccine Fraud",and"Volkswagen Emission Gate" have had a negative impact on the development of the capital market.The exposure of the scandal is likely to have an impact not only on the company itself,but also on the entire industry,affecting other companies in the same industry.Specifically,it can be reflected that the scandal will lead to a decline in the stock price of the company involved in the incident,and may also cause abnormal fluctuations in the stock prices of peer companies.In this context,it is of certain economic significance to study the economic consequences of scandals.This paper divides the economic consequences of listed company scandals into the economic consequences that the incident company needs to bear and the economic consequences that the non-incident company needs to bear.The most direct manifestation of the scandal’s impact on the company involved is the decline in stock prices.Will it have any impact on the company’s financial status?Will it cause abnormal fluctuations in stock prices of other companies in the industry?The types of scandals in listed companies can be divided into corporate overall operation scandals and executive personal scandals.Will different types of scandals have a positive or negative impact on the stock prices of competitors in the same industry?This paper launched a series of exploration and research on these issues.This article adopts the method of event study and case analysis,taking JD executive scandal and Runda Medical false operation scandal as writing cases,to study the impact of different types of scandals on the incident company(issuing company)and the impact on non-incident companies(affected company),and give corresponding suggestions.Firstly,the economic consequences of the two types of scandals on the incident companies are studied from the perspective of market performance and financial status.Secondly,the spillover effects of the two types of scandals on peer companies are studied from the perspective of market performance,and it is found that executive scandals have a significant impact on the company.The stock price of the company subject to the hearing has a positive impact,that is,the competition effect,while the operation scandal has a negative impact on the stock price of the company subject to the hearing,that is,the contagion effect,which will lead to a decline in the stock price of companies in the same industry to a certain extent.Accordingly,this paper selects 33 target companies and studies the ability of peer companies affected by the Runda Medical operation scandal to recover from the contagion effect through regression model.It is found that the contagion effect recovery ability is correlated with profitability and solvency.Finally,from the perspective of listed companies,this paper gives some suggestions on how to reduce the susceptibility to contagion effects of operation scandals of peer companies and improve the resilience of stock prices.Then give investors to prevent and deal with the scandal.Through the double-case study of two types of scandals,this paper draws the following conclusions.First,the JD executive scandal has a negative impact on the market performance and financial status of the company involved in the incident,and has a positive impact on the stock prices of companies not involved in the incident,which is reflected in the competition effect.Second,the Runda Medical operation scandal has a negative impact on the market performance and financial status of the company involved in the incident,and has a negative impact on the stock prices of non-incident companies in the same industry,which is reflected in the contagion effect.Third,after the Runda Medical operation scandal,companies in the same industry with high profitability and low debt repayment risk were able to recover from the contagion effect faster.The research contributions of this paper are as follows.First,this paper analyzes the executive scandals and operation scandals,explores the economic consequences of listed company scandals on the companies involved in the incident and the companies not involved in the incident in the same industry,and fills in the existing research gaps.It improves the coverage and completeness of the research on the economic consequences of scandals.Second,this paper analyzes the ability of the affected companies to recover from the contagion effect from the perspective of financial analysis,which enriches the theory and research on scandals of listed companies.It is hoped that the research in this paper can provide suggestions for other companies caught in executive scandals,companies caught in operation scandals and affected companies,and provide references for listed companies on how to prevent and recover from the contagion effect of scandals as soon as possible.