Master of Science / Department of Agricultural Economics / Ted C. Schroeder / This study focuses on the effects of food safety recalls on a firm’s shareholder value. In this study, the effects of six recalls are studied using the event study method. Three models were used involving the daily stock returns for each recall, the daily prices from the S&P 500 and the S&P 500-Packaged Foods and Meats prices. Each of these models was used to determine the abnormal returns for the individual recalls during a determined event window. The four companies responsible for the recalls are all large, highly-diversified food production companies. Overall, the results from this study show there is short-term effect on shareholder values for the companies included in this study. This is an important topic that was widely studied in the late 1990’s and early part of the 2000’s. There have not been any notable studies in this area in the past decade which is why this study is useful. Results of this study are comparable to those mentioned in the literature review section.

This thesis investigates the economic impact of food safety recalls on the capital share returns of publicly traded meat processing firms using the 2008 Listeria monocytogenes recall in Canada as a case study. The event study method was applied to this study to identify the size, direction and duration of abnormal returns to Maple Leaf Foods Inc. and Premium Brands Holdings which may have resulted from the Listeria recall. Results show that capital share returns to Maple Leaf Foods Inc. and Premium Brands Holdings were negatively impacted by the recall during the event window. Abnormal returns calculated during the post-event window provided evidence that Maple Leaf’s reaction to the announcement may have restored investor confidence in Maple Leaf shares to some degree and that Premium Brands Holdings lack of communication about their meat processing safety protocols may have negatively impacted Premium Brands share returns.

This study investigates the earnings management practices of firms around product recalls. In recent years, the management of earnings around firm-specific events has received considerable attention in the finance and accounting literature. New equity issues, mergers and acquisitions, share repurchases, and management buyouts are some events around which at least some firms have been shown to manage their earnings to achieve managements? objectives. Product recalls offer yet another interesting occasion when managers have incentives to cover up the true financial performance of their firms and mislead investors. In order to determine whether firms announcing product recalls manage earnings more aggressively than non-announcing firms, this study employs the cross-sectional version of the modified Jones (1991) model, as adapted by Teoh, Welch, and Wong (1998 a and b). In order to address the misspecification concern of the model, especially in the context of a performance-related event like product recall, we suggest a modification in the model. We show that the proposed change in the model not only better controls for event-specific working capital changes around recalls, it also increases the explanatory power of the model. Overall, our results suggest that managers tend to manage earnings upwards in quarters immediately preceding and following the recall announcement quarter. We also find weak evidence of downward earnings management in the quarter of recall. These results are in line with the predictions of theoretical models and the findings of past empirical studies in earnings management. The results of our research have important implications for investors and regulators.

The purpose of the present study was to gain insight on the real and perceived needs of food stamp recipients for use in developing nutrition education programs. Six focus group interviews with 26 food stamp recipients were conducted in six Virginia counties. Transcripts of the meetings were analyzed to identify themes prevalent in all of the focus group interviews. Ninety-two 24-hour food recalls from a different sub-group of food stamp recipients were also analyzed for food consumption frequencies, trends in food preparation, and common food purchasing locations. A key finding was that most focus group participants made food-related decisions while in the grocery store. Explanations for incidences of food resource scarcities included beliefs that the amount of food stamps was insufficient and that poor food purchasing decisions were made. Predominant food behavior changes that had been previously attempted were decreasing consumption of fat and fried foods and reducing portion sizes. Most of the reasons for attempting those behavior changes involved a desire for weight loss. Prevalent nutrition education interests were low-fat cooking and child nutrition. Results of the 24-hour food recall analysis indicated an inadequate consumption of fruits, vegetables, whole grain cereals, and dairy products. Seventy-five percent of the subjects purchased food in a grocery store and prepared meals at home. / Master of Science

Doctor of Philosophy / Department of Agricultural Economics / Ted Schroeder / Food recalls have been an issue of great concern in the food industry. Stakeholder responses to food safety scares can cause significant economic losses for food firms. Assessing the overall impact that may result from a food recall requires a thorough understanding of the costs incurred by firms. However, quantifying these costs is daunting if not impossible. A direct measurement of a firm’s total costs and losses of revenue associated with a food recall requires firm-level data that is not available. The method utilized in this study overcomes this severe limitation. Using an event study, the impact of meat and poultry recalls is quantified by analyzing price reactions in financial markets, where it is expected that stock prices would reflect the overall economic impact of a recall. A unique contribution of this study is evaluating whether recall and firm specific characteristics are economic drivers of the magnitude of impact of meat and poultry recalls on stock prices. Results indicate that on average shareholders’ wealth is reduced by 1.15% within 5 days after a firm is implicated in a recall involving serious food safety hazards. However, when recalls involve less severe hazards, stock markets do not react negatively. Also, reductions in company valuations return to pre-recall levels after day 20. Firm size, firm’s experience, media information and recall size are drivers of the economic impact of meat and poultry recalls. That is, firms recalling a larger amount of product perceive greater reductions in company valuations. Additionally, recalls issued by larger firms are less likely to present negative effects on stock prices, compared to smaller firms. Moreover, firms that have recently issued a recall are less harmed by a new recall compared to those firms issuing a recall for first time. Thus, suggesting that investors take into consideration the past performance of a company when dealing with food recalls. Furthermore, media information has a negative impact on shareholder’s wealth. Findings from this study provide essential information to the meat industry. In particular, understanding the likely impact of such “black swan” events is critical for firm’s investing in food safety technologies and protocols.

Master of Science / Department of Hospitality Management and Dietetics / Kevin R. Roberts / The purpose of this study was to explore United States school foodservice directors’ attitudes about food recalls and to determine recall practices in school foodservice operations. An online survey was used for data collection and consisted of three sections: attitudes, self-reported behaviors, and demographics. Content validity of the instrument was measured by three experts who examined the survey prior to pilot testing. The survey was pilot tested with 14 school foodservice directors and state agency personnel. Statistical analysis was completed using SPSS (v. 20.0). Internal consistency of the attitude scale was measured using Cronbach’s Alpha. All scales had a reliability coefficient greater than 0.70. The survey was randomly distributed to 4,049 school foodservice directors across the U.S. A total of 690 school foodservice directors (17%) completed the survey, with 567 being usable. Respondents rated attitudes on a 5-point scale, strongly disagree (1) to strongly agree (5). Principle components factor analysis was used to identify two factors: perceived importance and perceived likelihood of possessing a recalled product. Perceived importance was rated very high (M=4.8, SD=0.5), while perceived likelihood of possessing a recalled product was rated much lower (M=1.7, SD=0.8). Self-reported behaviors were evaluated on a 5-point scale, never (1) to very often (5). Overall, respondents reported positive behaviors related to responding to a recall. When dividing behaviors into three factors, behaviors regarding communication with state agency and vendors about food recalls (M=4.1, SD=0.6), use of recall systems (M=3.6, SD=1.0), and practices of responding to a recall (M=4.7, SD=0.4) were frequently reported. Multiple regression analysis was used to explore relationships between attitudes and behaviors of school foodservice directors towards food recalls, and their demographic characteristics. Predictors of attitudes were found to be certification, work experience, and prior experience with a food recall. Predictors of behaviors were found to be perceived likelihood of possessing a recalled product, educational level, prior experience with a food recall, and size of district. Federal and state agency personnel can use the results of this study in developing programs to improve food recall practices as well as school foodservice directors for improving recall practices in schools.

<div>The first chapter quantitatively examines the impact of exporting countries' reputations for product quality on aggregate trade flows. I introduce a novel data set in which recall incidences retrieved from the Consumer Product Safety Commission are matched to U.S. import data from 1990-2009. Using a model of learning I construct a measure for exporter reputation where consumers internalize product recalls as bad signals. Structural estimation of the model finds that reputation is important and especially impactful for products used by children. The market share elasticity of exporter's reputation is around 1.49 across products, similar in magnitude to the average price elasticity, which is around 1.51. Improving reputation can increase export value, but reputation is sluggish: increasing reputation by 10\% can take decades for most exporters. Counterfactual exercises confirm that quality inspection institutions are welfare improving, and quality inspection is especially important for consumers of toys. </div><div> </div><div> The second chapter summarizes the correlation between export decisions of Chinese firms and product recalls for Chinese products. I use a new data set where I link recall data scraped from CPSC to monthly Chinese Customs Data. I found that recalls from previous months correlates negatively with the decision of export participation, but not with export value. </div><div> </div><div><br></div><div> The third chapter, coauthored with Kendall Kennedy and Xuan Jiang, analyzes how China's industrialization and the immediate export growth due to the Open Door Policy change Chinese teenagers' education decisions, which explains the education decline. We find that, middle school completion rates increased and high school completion rates decreased in response to export growth. This suggests a tradeoff between education and labor market opportunities in China. These education effects are more prominent for cohorts who were younger when China's Open Door Policy began, even though these teenagers also faced a stronger education system compared to the earlier cohorts. </div>

Objectives: The purpose of this study was to investigate the effect of an 8-week aerobic exercise program on daily energy expenditure and intake in adolescents with normal-weight and with overweight or obesity. Methods: Prospective intervention study. The study included twenty-six adolescents aged between 14-18 years: 17 adolescents (8 girls and 9 boys) with normal-weight (BMI <85th percentiles for age and sex), and 9 adolescents (5 girls and 4 boys) with overweight or obesity (BMI 85th percentile for age and sex). The aerobic exercise program included 30 minutes of cycling performed on a Monark cycle ergometer 3 times a week for 8 weeks at an exercise target heart rate at 75% of participants’ heart rate reserve using the Karvonen formula. Total daily energy expenditure was measured with an indirect calorimeter wear for resting metabolic rate and a 7-day accelerometer for energy expenditure from physical activity. Energy intake was estimated with 24-hour recalls. Results: The aerobic exercise program did not have any significant effect on body weight. Significant effects of aerobic exercise on total daily energy expenditure (p=.051), energy expenditure from physical activity (p=.031) and total daily energy intake (p=.008) were observed, which mainly revealed a reduction in daily physical activity and energy intake following the exercise program. However, there was no significant effect of weight status and no interaction effect between of aerobic exercise and weight status for those three variables. Conclusions: Adolescents with normal weight, overweight or obesity not only reduced their daily total energy expenditure by reducing physical activity, but simultaneously decreased their total daily energy intake after an aerobic exercise program.

Corporate social responsibility (CSR) has moved to the forefront of many firms' concerns and is defined as a firm taking into consideration the interests of society by taking responsibility for the impact of the firm's actions on all stakeholders: customers, employees, shareholders, communities at large, and the environment. This dissertation will look at several public announcements and examine not only the level of corporate social responsibility a firm has but also the effects these announcements have on not only firm value but also customers' reactions to them. The three samples examined in the paper are boycotts announcements, recall announcements, and negative social responsibility announcements. The announcements were separated into the three groups to allow me to better analyze the effects of individual announcements and distinguish between types of announcements. The first part of the study focused on market response, measured by stock reactions and shows that the three samples of event announcements produced inconsistent results. Each of the three events produced the negative short term effects expected, either for Day 0 or for the post event period (+1, +30). However, the significance varied and the control sample for both recalls and boycotts produced positive post announcement results, implying that competitors are positively affected by these announcements. With regards to the control samples, only the general announcements control sample produced negative post announcement implying market wide affects. These test also showed that recalls may be subject more often to leakage. The general findings of this test are as expected though the significance was not. The second part of the study focused on customer's reactions, measured by change in market shares, to the three announcements. I found that no significant effect existed due to any of the three types of announcements, negative CSR announcements, boycotts, and recalls. This can be interpreted as the lack of public response to the announcements studied. These results were then followed up with a regression analysis that put the market share as the dependent variable and `Sample" as one of the independent variables. The purpose was to see if the firms that were subject to an announcement affected market share significantly. With regards to the tests establishing the effects of variables on market share, it was found that the results in all three samples were similar. The Size variable was always among the most significant followed by whether the firm is in its growth stages or mature stages. The Sample variable is the most important variable in the regression and shows that the subject firms did not have the expected effect on market share. For all three samples the Sample variable was not consistently significant but was, in fact, positive. This implies that a negative announcement positively contributes to market share. The implication of these regressions is not necessarily contrary to the event study first completed since the stock market study is observing owners' responses while the market share analysis is studying the customers' response to the same announcements. The final portion of the study shows that KLD is relatively effective at ranking firms, both at the product and firm level. Effective ranking is determined as the firm's lack of need to reassess a firm after an announcement. I find that there is no significant or economic difference in the ranking provided by KLD in the years surrounding the event. However, the regression results in all samples tested did produce the negative reaction in the KLD ranking that was as expected. However, it was only significant in the boycott sample. I conclude that the market reacts minimally to poor CSR and that customer's barks' are worse than their bite.

Business leaders increasingly grapple with longer and more complex supply chain nodes wrought by the globalization of corporate manufacturing processes. The flow of outsourced materials is also more vulnerable to high-profile product-harm crises, sabotage, product defect, and recall problems. The purpose of this single case study was to explore manufacturing strategies used by business leaders of an original equipment manufacturer (OEM) in the United States to minimize the defects in offshore-outsourced products. The sample was 2 OEM business leaders who have successfully reduced the defects in offshore-manufactured products in their Michigan facility. The conceptual framework was agency theory. Data were collected from observational field notes, company records, and transcripts of open-ended interviews. Data were coded and analyzed to identify emergent themes, which included factors the OEM considered in selecting offshore suppliers, strategies for minimizing defects, validation of the effectiveness of these strategies, and the development of trust and working partnerships with offshore suppliers. Reducing defect risks from outsourced products may decrease catastrophic fatalities and financial repercussions for businesses, and simultaneously improve consumer safety and trust as implications for social change.