An Empirical Study of China Quality Award on Firm's Market Value - Based on the Data from Chinese Stock Market

Abstract

This paper empirically investigates the relation between China Quality Award and the market value of the firm by a sample of public listed companies that have won China Quality Award from 2001 to 2005 in the mainland of China. Our results show that the award winners experienced remarkably positive abnormal returns on the day of announcement ranging from 0.55% to 0.77% depending on the model used to generate the abnormal returns. According to Hendricks and Singhal (1996), winning a quality reward conveys the information about the systematic risk of the firm. However, we haven't found a statistically decrease in the equity and asset betas after the quality award announcement. Finally, the factors that affect abnormal returns are investigated, empirical results show that debt ratio of the firms and the award prestige have an significant impact on abnormal returns, however, the firm size doesn't play an important role on abnormal returns.