Revisiting the stock price impact of quality awards Greg Adams a , Grant McQueen b , Kristie Seawright a, * a Department of Business Management, Marriott School of Management, Brigham Young University, Provo, UT 84602, USA b Finance Department, College of Business, Arizona State University, Tempe, AZ 85287, USA Received 1 August 1997; accepted 1 March 1999 Abstract In an event study, Hendricks and Singhal [Hendricks KB, Singhal VR. Quality awards and the market value of the ®rm: an empirical investigation. Management Sci 1996;42:415±36.] ®nd evidence that ®rms that win quality awards are further rewarded with a stock price increase on the day of the award announcement. We revisit Hendricks and Singhal (1996), extend their research and ®nd four reasons why management, owners and analysts should be cautious about expecting an abnormal return when a ®rm wins a quality award. First, in our sample of Baldrige Award winners, the evidence of a stock price response on the announcement day is only marginally signi®cant. Second, in our sample of State quality award winners, the announcement day relationship between stock returns and winning awards is not signi®cant. Third, in the most recent subperiod, 1992±1997, we ®nd no evidence of positive abnormal returns. Fourth, the marginally signi®cant Baldrige results are actually driven by just four companies. A company-by-company microanalysis reveals that only 50% of the award winners experienced positive abnormal returns. The diminishing stock price response on event day does not necessarily imply a lack of stockholder rewards. Evidence from other studies suggests that the stockholders are rewarded for successful total quality management (TQM) implementation, but the rewards can come long before and after the formal award is presented. From a shareholder value perspective, TQM still matters but the award ceremonies may not. # 1999 Elsevier Science Ltd. All rights reserved. Keywords: Baldrige Award; Event study; Securities; Total quality management 1. Introduction Total quality management (TQM) is a philosophy intended to improve stakeholders' welfare. Theoretically, the needs of all stakeholders, including customers, employees and stockholders, should be bet- ter met through TQM program implementation. Rewards to customers are so integral to TQM that Juran [16] de®nes quality as ®tness for customer use. Ishikawa and Lu [15] extend this view to encompass total customer value, encouraging excellence at an acceptable price. Employee needs are also met by TQM. Deming [5] notes that job security increases as improved quality helps producers maintain and increase market share. Furthermore, Ishikawa [14] ties employee job satisfaction to production variation re- duction and recommends that management practices which encourage employee commitment be included in TQM programs. Theory suggests that, along with customers and employees, stockholders too should be rewarded by Omega 27 (1999) 595±604 0305-0483/99/$ - see front matter # 1999 Elsevier Science Ltd. All rights reserved. PII: S0305-0483(99)00025-0 www.elsevier.com/locate/orms * Corresponding author. Tel.: +1-801-378-3017; fax: +1- 801-378-5984 E-mail address: kristie_seawright@byu.edu (K. Seawright)