Abstract
The effects of National Quality Award on the market value of the award-winning firms is an ongoing study in foreign countries, but relevant studies are difficult to find in Taiwan. This study empirically examined three issues related to the market valuation of firms that undergo effective quality improvement programs (which sometimes are referred to as Total Quality Management or TQM) using Taiwan National Quality Award as the indicator that an effective quality improvement program has been implemented. First, comparing the NQA Index (which represents National Quality Award winners’ stock price performance) with the Sector Index (which represents public traded companies’ average stock price performance of the sector), no statistical evidence was found to support the assumption that the stock performance of the quality award winners is superior to the average rate of return on the Taiwan stock market. Second, we used the “event study” methodology to measure the stock price effects of quality award announcements. The component attributed to firm-specific events is typically referred to as the “abnormal” return. Our results show that the abnormal return reacted positively to quality award announcements, but did not occur on the announcement day. Third, we increased the number of event days and proceeded the microanalysis of the individual award winners. These additional days were available to examine whether or not the risk of the firm changed after winning a quality award. Our microanalysis revealed that 75% of the award winners experienced positive average abnormal returns, indicating that implementing an effective quality improvement program could provide a long-term return to the market value of firms.