China quality award and the market value of the firm

Abstract

Quality has always been an important factor affecting the competitive advantages and financial performance of firms. Some research has examined the impacts of Malcolm Baldrige Award and European Quality Award announcements on the market value of winners. However, the effect of the China Quality Award on firm market value has rarely been studied and has not been fully elucidated. On the basis of 85 China Quality Award announcements, this study explores whether winners show significant abnormal stock returns on the award announcement day using an event study. Some firm characteristics, such as ownership type, industry type, registered address, first time winning the award or not, and whether related firms won the awards are further considered. A market adjustment model is also adopted to re-estimate the short-term market reaction to test the robustness of our findings. It is found that China Quality Award winners do not show a significant market reaction for the full sample in the short term. However, the China Quality Award has brought significantly positive benefits to firms located in eastern China, first-time winners, and firms winning the award themselves. The long-term stock price performance is significantly positive. The findings may expand the research on the relationship between quality awards and firm market value in various institutional contexts.