Managing a Quality Award and Stock Market Reaction: Evidence from Malaysia

International Journal of Applied Quality Management (ISSN: 1742-2647) Volume 2 Issue 1

Cheah Eng Tuck

Assistant Professor of Finance
Nottingham University Business School
The University of Nottingham
Malaysia Campus


In the wake of the digital age, Malaysian companies need to remain competitive by weaving into their business practices the core elements of the total quality management. The Prime Minister Quality Award (PMQA) is awarded annually since 1990 to encourage private-sector companies to strive for business or organizational excellence. The prestigious award is administered by the Malaysian Administrative Modernisation and Management Planning Unit (MAMPU). The success of these programmes should be well received by both investors and managers. Using the event study methodology, the null hypothesis of no abnormal return were tested on two companies since there were only two companies from the entire list of recipient companies from 1990 until 2003 are listed in the Bursa Malaysia (previously known as the Kuala Lumpur Stock Exchange). It was found that the announcement of the award did not yield any statistically significant abnormal return to the stock market participants holding or trading the securities concerned. One possible explanation would be that the stock market is efficient in the semi-strong form suggesting that investors have discounted all the benefits that a company could possibly derive from introducing a working quality improvement programme when the company originally initiated the programme and not when the company wins the award. Therefore, winning such an award should not create further value to the stock prices and is already impounded in the stock price the moment the corporate pursuit of the quality award was announced. Both the Jensen’s and Treynor’s Performance Indexes were used to assess the relative performance of a portfolio containing the recipient companies against that of the market as a whole and against other fund managers. It was found that both of the companies underperformed the market index.

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