A Fortune from Misfortune: Evidence from Hog Firms' Stock Price Responses to China's African Swine Fever

Tao Xiong, Wendong Zhang, Chen-Ti Chen
June 2020  [20-WP 602]

China is the world's largest pork producer and a leading pork importer. Since August 2018, ongoing outbreaks of African Swine Fever (ASF), a highly contagious and deadly disease affecting pigs, have hit China's livestock industries and wiped out 40% of China's pigs. We leverage data on daily stock returns from 25 major publicly listed firms from China and eight major pork-exporting countries to provide the first systematic analysis of the firm-level economic impacts of the outbreaks. We find that on average announcements of ASF outbreaks have led to positive and significant stock returns for both Chinese and international hog companies. Notably, Chinese hog companies on average enjoyed 10%-40% of cumulative abnormal returns during the 2019 Chinese Spring Festival, a peak demand season for pork. We show that larger hog firms tend to capture greater positive stock returns. Our results suggest opportunities for consolidation, expansion, and upgrades of China's meat industry that have long-run implications for its global competitiveness and efficiency.

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