Global Marketing Conference 2018 Global Marketing Conference at Tokyo (p.1403-1406)

INVESTOR RESPONSE TO FOOD NUTRITION LABELING REGULATION IN CHINA

키워드 :
food nutrition label,emerging market investor,advertising,donations,R&D

초록

Product labels are one way for advertisers to provide information to purchasers on product quality (Atkinson & Rosenthal, 2014). Label policies have been issued to promote information disclosure on food products in some developed countries. Recent years have also seen increasing attempts to promote healthy eating in emerging markets. In China, nutrition labels became mandatory under the nutrition labeling acts. The laws require nutrition information to be presented at the point of purchase as well as in establishments where food is prepared or consumed. Additionally, similar actions were taken by India (India Ministry of Health and Family Welfare, 2011), Mercosur members and in South Africa (Brazilian Ministry of Health, 2012; Institute of Food Technologists [IFT], 2011). While nutritional labeling has received a lot of attention both in academia and from the press, some key gaps remain in the nutrition labeling literature. First, a great deal of marketing research has focused on consumer responses (e.g., Balasubramanian & Cole, 2002; Hieke & Taylor, 2012; Ippolito & Mathios, 1995; Parker & Lehmann, 2014; Shah, Bettman, Ubel, Keller, & Edell, 2014) and firm responses (e.g., Moorman 1998; Moorman, Du, & Mela, 2005; Moorman, Ferraro, & Huber, 2012) to nutrition labeling laws. Although stock market investors express greater interest in information about nutrition issues that can be integrated into financial analyses (Global Access to Nutrition Index [ATNI] Investor Statement, 2013), the issue of how standardized information requirements affect investors’ responses in financial markets has been understudied. As used here, standardized product-information disclosure refers to a requirement to present facts about firms’ offerings in a common format using uniform metrics (Moorman et al. 2012). Understanding the extent to which investors consider product information-disclosure polices when they make investment decisions is important because a company’s financial health is not only the ultimate measure for the success or failure of any strategic initiative (Luo & Bhattacharya, 2009), but also one of the most important measures of public policy effectiveness (Joshi & Hanssens, 2010; Srinivasan & Hanssens, 2009; Schwert, 1981). Moreover, urgent concerns have spilled over from the product market to the financial market (Chen, Ganesan, & Liu, 2009) due to the enormous economic costs and damage to firms’ reputations in product-harm crises (e. g., melamine contamination in several Chinese brands of infant milk powder) (Ngo, 2014). Another gap in the literature is how nutritional-labeling requirements affect emerging markets. In contrast to the situation in long-developed countries, emerging markets are subject to different pressures for food marketers and thus a distinctive environment surrounds the regulation of food product labeling. In China, food safety and quality is considered an urgent concern, and the issue has forced regulators and companies to take action (Yan, 2008). Unlike mature stock markets, the majority of investors in China are individuals (Chen, Li, & Shi, 2010). The Chinese markets are under-regulated and deficient in gathering and disseminating information to private or public organizations, and it is difficult for listed firms with insufficient records to form reputations (Singh et al., 2005). As a result, information asymmetry is accentuated and imperfect signals released from firms highly impact investor decisions. Thus, examining the effectiveness of labeling requirements in developing economies is important as is comparing these results to those found in more developed countries. Despite the importance of the issue in emerging markets, empirical work for investigating investor response to the public policy of nutrition labeling (Ghani, & Childs, 1999) or firms’ nutrition claim strategies (Cao & Yan, 2016) has been restricted in developed markets (e.g., the U.S.). Little is understood the changes in corporate financial performance because of regulations requiring product information disclosure in emerging markets. As a result of the pressures for consumer protection and regulation, it is increasingly important for policy makers to be able to understand the financial consequences of such regulation because of information disclosure policies (Moorman et al., 2005). Thus, an additional contribution of this study is to help better inform the policy debate in emerging markets. To fill these research gaps, we investigated the influence of the influx of standardized product information on the stock market. Specifically, we conducted an event study to examine the effect on firms’ stock values from the issuance of the food nutrition label acts (FNLAs) in China, a fast-growing emerging market. The acts require food manufacturers to provide standardized nutritional information on pre-packaged food labels. This study contributes to the marketing literature on the financial impact of regulation in emerging markets. In China, on the day the FNLA was issued, they were associated with positive abnormal stock returns of related firms. This result is contrary to the study by Ghani and Childs (1999) that reported that the NLEA passage showed a negative impact on firms’ stock prices. Second, the financial value from the issuance of regulations was strengthened by three marketing leverages—advertising, donations, and R&D. Finally, although Moorman et al. argued that the NLEA increased the number of small-share firms exiting the U.S. market (Moorman et al., 2005), we found that in the short term, large firms benefited less than small firms from product information disclosure in China’s stock market. These findings provide empirical evidence that regulatory controls create changes in shareholder wealth and provide an assessment of the financial market’s perceptions regarding the role of mandatory product- information disclosure in future corporate growth. In addition, evidence of the effects of regulatory changes on wealth is of significant value to policymakers and market participants as they evaluate the benefits and costs of information disclosure in emerging markets.