The Taiwan national quality award and market value of the firms: An empirical study

The effect of national quality awards on the market value of the award‐winning companies is an ongoing study in many countries, but relevant studies are difficult to find in Taiwan. This study empirically examines the market valuation of firms that undergo effective quality improvement programs (sometimes referred to as Total Quality Management or TQM). We use the Taiwan National Quality Award as the indicator that an effective quality improvement program has been implemented. We use 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 this positive reaction did not occur on the announcement day. We then increased the number of event days and micro‐analyzed the individual award winners. These additional days enabled us to examine whether or not the risk of the firm changed after winning a quality award. Our micro‐analysis revealed that 75% of the award winners experienced positive average abnormal returns, indicating that the implementation of an effective quality improvement program could provide a long‐term return to the market value of firms.