Reaction of the stock market of meat towards corporate scandals

Abstract

In March 2017, the Brazilian beef and dairy sector was surprised by Operation Meat Loaf, which investigated allegations of adulteration in foods produced by several companies in this segment. Among the companies investigated were BRF and JBS, the two largest Brazilian companies in the industry. Thus, this article aimed to ascertain the impact of this operation on the value of meat companies listed in B3. The market efficiency hypothesis was tested in the semi strong form and the possible impacts to shareholders were identified in the comparison between the period before and after the transaction. For the purpose proposed, the method of the study of events was applied, obtaining the data through the site of B3 and the base Economatica. The null hypothesis of non-efficiency of the market (H0A) was discarded, since the abnormal returns accumulatedat the event date were statistically different from zero. In the comparison of the 20 days before and after the event window, the paired t-test showed that the operation did not impact the market even after the five-day window, accepting the null hypothesis H0B. For future research the increase in the estimation window of the regression model and the analysis of hypothesis of adaptive markets were suggested.