Consumer Confidence in the Food System, Media Coverage and Stock Prices of Food Companies: A Regression Analysis

Abstract

A series of recent and serious food safety incidents have generated a national debate over the significant costs that they impose on various stakeholders - consumers, industry, or the government. This paper examines the impact of media coverage of food safety and defense issues on consumer confidence in food safety, and measures the response of stock prices of food companies to changes in consumer confidence. Results show that, increases in media coverage have a negative impact on consumer confidence, and that decreases in the levels of consumer confidence on food safety have a negative impact on stock prices of food companies, in particular for the larger firms. These findings confirm that the financial performance of food the industry is negatively affected by category-specific food safety events, and the effects of media coverage on consumer confidence in the safety of the food system.