A quality award and stock market reaction: Evidence from Malaysia

Abstract

The Prime Minister's Quality Award (PMQA) is the most prestigious award in recognition of a company's effort towards organizational excellence. The intention is to create awareness among the business community on the importance of implementing a quality improvement programme in the company and to use recipient companies listed on the Bursa Malaysia. It was found in this study that the stock market is semi-strong efficient and the announcement did not bring the intended effect of creating statistically abnormal returns. After adjusting for thin trading, it was discovered that the traditional production-based company under-performed the market index while the service-based company, however, outperformed the market index. It is argued and widely understood by investors that a production-based company ought to have in place a proper quality control mechanism and further investment to impress the business community is rather futile. On the other hand, for the service-oriented company, expectations of customers are diverse and difficult to gauge. Therefore, any service provider wishing to improve the quality of their services is very welcome.