Cheah, Jeremy Eng Tuck (2007) Baldrige Award announcement and long memory in shareholder wealth. Total Quality Management and Business Excellence, 18 (1-2), 209-218. (doi:10.1080/14783360601053517).
Abstract
In a competitive global market environment, the successful institution and implementa-tion of a comprehensive quality improvement programme is pivotal in attaining and sustaining business excellence. Tangible evidence of a company's level of excellence can be demonstrated by winning a prestigious quality award like the Malcolm Baldrige National Quality Award (MBNQA). While the intention to raise the level of competitiveness in all business sectors is lauded, two pertinent issues arise. Firstly, do investors or stock market participants share the belief that quality leads to business excellence. This implies that the stock market participants may have limited knowledge and experience in assessing the impact of quality improvement initiatives on performance (Easton & Jarrell, 1998). Secondly, if investors do believe and are able to assess the benefits quality improvement initiatives bring, would they acknowledge the benefits these quality awards bring in terms of sustained returns? This paper, an extension from studies by Przasnyski & Tai (2002) and Ramasesh (1998), attempts to investigate the long run sustainability of returns by recipient companies of the MBNQA from 1988 to 1996. Using long memory models commonly used in the financial econometrics literature, it was found that most recipient companies do not display long memory or, in short, recipient companies cannot sustain the previously generated significant abnormal returns on the day of announcement of winning the award.
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