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For China, scandals of listed companies have never stopped. In2011, bad news broke out again. Shuang Hui, one of the well-known meat enterprises in China, put Clenbuterol into its meat products, which brought negative effects to the whole society, the most prominent one was, it caused many consumers and investors panic. When consumers and investors questioned the scandal company, they started to associate bad effects with similar companies in the same industry.If one company was affected by the social doubt, then its stock price and market sale would be affected too, we can say this company was contaminated. On the contrary, if one company took some steps, and resisted the bad effects, we can say this company got the effect of competition.Previous studies are rarely involved in the food industry, but for the frequent food safety events in China, such research has its certain sense, not only can we observe the effects for the whole food industry, but also can we trace the process of changes, which can provide timely suggestions for other companies in the same industry, and reduce the confusions of investors and consumers.This research starts by the event of Shuang Hui "Clenbuterol" scandal exposed in March15,2011, and chooses34listed companies as a sample in the food and beverage industry that have similar business with Shuang Hui. The main research approach is Event Study. It takes70days to11days before the event as Estimate Window,10days prior to the event to10days after the event as Event Window, and uses Market Model to estimate stock returns.Through the calculation of test indicators and Significant Analysis, It comes to the conclusions that:first, for the food industry, the contagion and competition effects are relatively weak for most individual companies, only two companies are affected significantly, one of them shows significant competition effect, and the other one shows significant contagion effect, but through searching the corporation management report, these two companies were affected by the market economy more in2011. Second, although the contagion effect is relatively weak for most individual companies, it is significant for the entire industry, and occurred-5days prior to the event day. At this time, due to the spread of negative news from the networks and other publicity channels, consumers and investors will question the whole industry, and then the other companies in the same industry during this time will be contaminated. But this effect sustains no long, as long as consumers and investors identify the scandal is only individual, they will withdraw the negative assumption from other companies. Third, through searching semi-annual main business income of34companies in2011, we find that, despite majority of sample companies got better main business income in the event occurred year, the main reasons were not the competition effect. This research also analyzes several companies which have closest main business with Shuang Hui and finds that, companies more similar to the scandal company, they are more vulnerable to the contagion and competition effects. Finally, it provides relevant recommendations for companies in the food industry and relevant government departments.The innovation of this research is choosing food industry for studying, and taking food safety scandal as the event. In addition, it adds semi-annual main business income of34companies to analyze the relationship between corporation performance and industry effects, so as to combine with the conclusions of Event Study.
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