View
212
Download
0
Category
Preview:
Citation preview
This article was downloaded by: [University of Birmingham]On: 10 November 2014, At: 17:56Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK
Total Quality Management & BusinessExcellencePublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/ctqm20
Baldrige Award Announcement andLong Memory in Shareholder WealthJeremy Eng Tuck Cheah aa University of Nottingham Malaysia Campus , Jalan Broga,MalaysiaPublished online: 21 Feb 2007.
To cite this article: Jeremy Eng Tuck Cheah (2007) Baldrige Award Announcement and Long Memoryin Shareholder Wealth, Total Quality Management & Business Excellence, 18:1-2, 209-218, DOI:10.1080/14783360601053517
To link to this article: http://dx.doi.org/10.1080/14783360601053517
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of all the information (the“Content”) contained in the publications on our platform. However, Taylor & Francis,our agents, and our licensors make no representations or warranties whatsoever as tothe accuracy, completeness, or suitability for any purpose of the Content. Any opinionsand views expressed in this publication are the opinions and views of the authors,and are not the views of or endorsed by Taylor & Francis. The accuracy of the Contentshould not be relied upon and should be independently verified with primary sourcesof information. Taylor and Francis shall not be liable for any losses, actions, claims,proceedings, demands, costs, expenses, damages, and other liabilities whatsoeveror howsoever caused arising directly or indirectly in connection with, in relation to orarising out of the use of the Content.
This article may be used for research, teaching, and private study purposes. Anysubstantial or systematic reproduction, redistribution, reselling, loan, sub-licensing,systematic supply, or distribution in any form to anyone is expressly forbidden. Terms &Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions
Baldrige Award Announcement andLong Memory in Shareholder Wealth
JEREMY ENG TUCK CHEAH
University of Nottingham Malaysia Campus, Jalan Broga, Malaysia
ABSTRACT In a competitive global market environment, the successful institution and implementa-tion of a comprehensive quality improvement programme is pivotal in attaining and sustainingbusiness excellence. Tangible evidence of a company’s level of excellence can be demonstrated bywinning 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, twopertinent issues arise. Firstly, do investors or stock market participants share the belief that qualityleads to business excellence. This implies that the stock market participants may have limitedknowledge 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 qualityimprovement initiatives bring, would they acknowledge the benefits these quality awards bring interms of sustained returns? This paper, an extension from studies by Przasnyski & Tai (2002) andRamasesh (1998), attempts to investigate the long run sustainability of returns by recipientcompanies of the MBNQA from 1988 to 1996. Using long memory models commonly used in thefinancial econometrics literature, it was found that most recipient companies do not display longmemory or, in short, recipient companies cannot sustain the previously generated significantabnormal returns on the day of announcement of winning the award.
Introduction
In the face of globalization, a prerequisite for any company to succeed is to institute and
implement an effective and comprehensive quality improvement programme. It is not only
a sufficient condition to fill orders but also a necessary condition to win orders. From the
outset, it was envisaged that the awareness for the need for continuous improvement in
quality among companies would increase with the introduction of prestigious awards
such as the Malcolm Baldrige National Quality Award (MBNQA) and the Deming
Prize. Since its inception in 1988 and the announcement of the first recipient in 1989,
MBNQA was created in an effort to boost the overall competitiveness of most US com-
panies (Hodgetts et al., 1999). Judging from the enormous resources and energies spent
Total Quality Management
Vol. 18, Nos. 1–2, 209–218, January–March 2007
Correspondence Address: Jeremy Eng Tuck Cheah, Nottingham University Business School, University of
Nottingham Malaysia Campus, Faculty of Social Sciences and Education, Jalan Broga, 43500 Semenyih Selangor
Darul Ehsan, Malaysia. Email: cheah_eng.tuck@nottingham.edu.my
1478-3363 Print=1478-3371 Online=07=1–20209–10 # 2007 Taylor & FrancisDOI: 10.1080=14783360601053517
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
in attempting to win these awards, they are also seen as a form of recognition for the efforts
by the companies as well as reflecting their belief that quality leads to business excellence.
Voluminous books and articles have been written about the MBNQA since its inception
and many companies have, either adopted, or made variations to the Award’s core values
and concepts as well as its accompanying extensive scoring guidelines. However, there are
two major issues to address. First, if investors or stock market participants are capable of
assessing the impact of quality improvement programmes on the performance of com-
panies, would they believe that quality leads to business excellence in terms of financial
returns? Even if they do believe that it does, would they acknowledge the benefits that
these quality awards bring in terms of sustained significant abnormal returns?
Apparently, there are two schools of thought surrounding the issue of whether winning
prestigious quality awards lead to improved performance and, eventually, business excel-
lence. Despite the fact that proponents of the awards argue that MBNQA was never meant
to be an indicator of financial success, it should not undermine the important role that the
award plays in promoting quality at the national arena (Stratton, 1993). Since winning
MBNQA cannot guarantee superior financial returns, opponents from the other school
argued that the pursuit of the MBNQA leads not only to additional cost and wastage
but also to a loss of strategic focus of the companies involved.
Even though there are extensive studies documenting the non-financial benefits of well
designed and executed quality improvement programmes, little has been published on the
financial rewards (Wilson et al., 2003). Consider the following dividend discount model
commonly used in the corporate finance literature as one of the methods for valuing the
underlying stock price to illustrate the financial benefits aspect:
Pt ¼X1t¼1
E DtþpjVt
� �1þ rtþp
(1)
where Pt is the intrinsic value of the stock price at time t, E(jVt) represents the mathe-
matical expectation operator conditional upon the available information set during time
t while Dtþp is the amount of dividend paid at time tþ p and rtþp is the stochastic discount
rate for cash flows that occur at time tþ p. It is contended that this model would predict a
change in the fundamental price of the stock if economic information pertaining to the
company influences the expected future stream of dividends or the discount rate or both.
If stock analysts are convinced that a positive difference in the change in the perception
of quality can increase the expected future cash flows (dividends) and/or lower the dis-
count rates conditional to the information set available at time t, Vt, which incorporates
all publicly available information investors would have on the company and its economic
environment, the unanticipated news of winning MBNQA, previously unknown to the
investors should almost instantaneously bring about a change in the stock price of the
company, given that the stock price is efficient.
This paper attempts to study the long run sustainability of the return and the behaviour
of stock market participants of recipient companies after these companies have won the
prestigious MBNQA. This analysis is an extension from two previous papers, one by
Ramasesh (1998) and the other by Przasnyski & Tai (2002). Using long memory
models in representing the persistence characteristics of time series commonly used in
the financial econometrics literature, it was found that all eight recipient companies of
210 J. E. T. Cheah
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
the MBNQA taken from the year 1988 until 1998, did not exhibit long memory at 150 and
200 trading days after winning the MBNQA. A direct implication of this could be the fact
that investors do not believe winning the MBNQA will lead to business excellence in
financial terms in the long run and therefore; the statistically significant abnormal
return previously created on the day of announcement is not sustainable. Subsequently,
there is possibly a negative effect on the shareholder wealth and investors who bought
these stocks are advised to dispose of them relatively fast in order to lock in the statistically
significant abnormal return on the day of announcement and to prevent the reversal effect
that takes place soon after that. This paper is different from previous studies on quality in
two significant ways. It seeks to resolve the debate of sustainability of shareholder wealth
after winning the MBNQA by studying the long term impact of the Baldrige Award
announcement on the shareholder wealth. Secondly, by extending from previous
studies, the paper investigates the sustainability of shareholder wealth using long
memory models common in the financial econometrics literature, long after these recipient
companies are awarded with the prestigious MBNQA.
Literature Review
On the first issue of whether investors share the belief that quality initiatives lead to
business excellence measured in financial returns, there are several studies which
attempted to provide possible linkages between quality initiatives and financial returns.
In a study by Docking & Dowen (1999), they suggested that a single ISO 9000 registration
can produce an approximately 0.9% gain in the market value in lesser known firms. As
such, a long sustainable and working quality improvement programme can lead to
better productivity and increased internal and external customer satisfaction, which will
decrease the cost and price of goods and services. This will increase the viability of the
company and command a greater market share. Fisher et al. (2001) found that winners
of the MBNQA showed greater increases in the share prices than the increase in the
Dow Jones Industrial average. Ramasesh (1998) found that the announcement of
the MBNQA recipients is an indicator of the improved future financial performance of
the award-winning companies.
On the other hand, there are some studies arguing that quality is no longer viewed as a
competitive weapon for market entry and acceptance in the last decade and the suggested
positive link between the influences of quality improvement programmes on stock prices is
weakening (Hendricks & Singhal, 1996). Further, they maintain that even though winning a
quality award such as the MBNQA may not exert any impact upon the current price level of
its stock, it can be used as an opportunity to inform its existing customers, to attract new
customers and to reassure customers with negative experiences in the past that it has
improved the quality of the products and services offered. This, in turn, can generate a posi-
tive effect by improving expected future cash flow earnings and by reducing the level of
risk; the latter in turn leading to a favourable stock price reaction.
Adam et al. (1999) believed that winning a quality award may have limited influence on
stock prices because it just does not matter. In their study, they found that some of the
Board of Overseers of the MBNQA indicated that the award may not matter financially
after all. This would imply that winning the award has no implications for either a corpo-
rate recipient’s future cash flow earnings or for its risk-adjusted discount rate. In addition,
Hendricks & Singhal (1996) found that only customers and not award giving organizations
Baldrige Award Announcement and Long Memory in Shareholder Wealth 211
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
have the expertise and final say in judging the quality of products and services provided by
the firm. Resources spent on the cause of winning a quality award, when it is in fact a non-
event, may eventually cause a price decline. Sometimes, excessive attention in terms of
marginal cost of resource allocations in implementing a quality improvement programme,
beyond the marginal benefits shareholders may receive from it, may decrease the value of
the shareholders assets (Adam et al., 1999).
Furthermore, arguing from a cultural perspective, Goh et al. (2003) predicted that cul-
tural resistance to increased participation by the company’s employees, customers and
stakeholders in the process of implementing the quality improvement programmes may
not invoke much enthusiasm among stakeholders to justify for statistically significant
abnormal returns in the stock price of the company. They also argued that quality improve-
ment programmes are meant to reduce cost and increase productivity and require a pro-
longed period of time to successfully implement and therefore could not conceivably
have any reaction on stock performance or produce only at best a marginal reaction.
International evidence suggests that recipient companies of national awards do not show
statistically significant abnormal return on the day of announcement of the winners of their
respective awards. For example, Martinez-Costa & Martinez-Lorente (2003) discovered,
after applying parametric and non-parametric tests, no clear evidence to affirm that market
value is positively related to ISO 9000 registration in their a sample of Spanish companies
certified by AENOR. Similarly, Cheah (2005) argued that after adjusting for thin trading
for Malaysian recipient companies of the Prime Minister’s Quality Award, there was no
statistically significant abnormal return on the day of announcement.
As such, it seems that there exists an abundance of literature on quality to suggest that
investing resources, especially financial resources in competing for and winning the
MBNQA is at best a drain on shareholders’ wealth. Apparently, companies such as
Federal Express and General Motors’ Cadillac Division did not fare well in their financial
results after winning the MBNQA (Ramasesh, 1998). Wallace Company, one of the reci-
pients of MBNQA, was laden with $17 million debt one year after winning the MBNQA in
the small business category (Ivey & Carey, 1991). The widely held pessimistic view of the
financial performance among the recipients of the MBNQA among stock market partici-
pants is best captured by Garvin (1991) when he noted that certain Wall Street analysts
actually short the shares of MBNQA recipient companies in anticipation of poor financial
performance subsequent to winning the Award.
In the financial economics literature, Fama (1965) argued that stock prices in an efficient
market would fully reflect all relevant and available information, implying that the stock
market participants have discounted all the benefits that a company would derive from
introducing a working quality improvement programme when the company initiated the
programme and not when the company wins a quality award. This would imply that the
successive one-period stock return or prices are independently distributed. Therefore,
winning a quality award should not create any more value to the stock price subsequently
and, in fact, any stock price reaction during the announcement of the company winning the
award could suggest that the stock market is likely to be inefficient. If the market is ineffi-
cient, these successive one-period stock return or price observations are not independent
and carry a ‘memory’ of all the events that preceded it. This long-term memory theo-
retically lasts forever and is quite unlike the ‘Markovian’ short-term memory. More
recent events have a greater impact than distant events even though the residual influence
is still present (Peters, 1996).
212 J. E. T. Cheah
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
Sources of uncertainty in economics and finance are sometimes seen to have similarities
with natural phenomena. According to Lo (1991), studies using long-range dependence
have been popular and extensive in the natural sciences such as hydrology, meteorology
and geophysics. More recently, these techniques and methods have found their way into
the economics and finance literature. The presence of long memory components in
asset returns would invalidate the results of the recent tests of the efficient market hypo-
thesis postulated by Fama (1965). Among the earlier studies are those by Mandelbrot (1971)
and Greene & Fielitz (1977) who have discovered the presence of long-range dependence
and the possibility, and implications, of persistence statistical dependence in asset returns
in the daily returns of many stocks listed in the New York Stock Exchange.
Methodology and Result
The debate or controversy surrounding the issue of whether quality leads to more superior
financial performance against other non-recipient companies is still very active; this paper
takes the position that successful quality initiatives, as evident in winning a prestigious
award, do lead to superior financial performance as reflected in the abnormal returns on
the day of the announcement, as reported by Ramasesh (1998).
Integrated moving average (ARIMA) models are popular among time series experts and
forecasters in studying the intertemporal dynamics of stock prices and forecasting pur-
poses. Originally known as the Box–Jenkins methodology, there is a dearth in the litera-
ture when it comes to measuring the financial benefits of continuous improvement
programmes, let alone modelling long-memory or sustainability of return in the data.
In this paper, recipient companies of the MBNQA were taken from the list provided in
Table 2 in Przasnyski & Tai (2002). A total of 35 recipient companies were awarded the
MBNQA during the period from 1988 to 1998. This list is then checked against the list pro-
vided by Ramasesh to ensure that only publicly traded companies without any other impor-
tant firm-specific announcements (other than winning the MBNQA) on the same day are short
listed. This is to ensure the reliability of the findings in the study. Since this paper takes the
position that abnormal returns earned by these recipient companies are risk-adjusted, only
companies with both Treynor’s and Jensen’s Indices of over-performing the market were
taken. A total of eight companies remained after the filtering process (see Table 1).
A covariance stationary time series that is said to follow an autoregressive fractionally
integrated moving average (ARFIMA) process of order ( p, d, q) may be written using
operator notation if
F(B)(1� B)dXt ¼ Q(B)ut ut � iid (0, s2) (2)
where B is backward-shirt operator, F(B) ; 1 2 f1B 2 . . . 2 fpBp, Q(B) ; 1þ u1Bþ
. . . þ uqBq, and (1 2 B)d is the fractional differencing operator defined as (1 2 B)d ¼Pk¼01 G (k 2 d) B k/ G (2d) G (kþ 1) G (.) being the gamma function.
Recent literature in financial econometrics criticizes the restriction of the value of d to
only integer values (either a 0 or 1) in standard econometric tests of unit root as commonly
found in tests such as the Augmented Dickey–Fuller and Phillips–Perron tests (Diebold &
Rudebusch, 1989a, b; Diebold et al., 1991; Sowell, 1990, 1992). By allowing d to take
fractional values, it generalizes the standard autoregressive moving average (ARIMA)
Baldrige Award Announcement and Long Memory in Shareholder Wealth 213
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
Table 1. List of companies from Przasnyski & Tai (2002), Ramasesh (1998) and companies used in this study
Date of
award Winning company (or parent)
Treynor’s
index�Jensen’s
measure�Industry
types��Ramasesh’s (1998)
sample���Inclusion/Exclusion
in this study
14 Nov 1988 Motorola Yes Yes M Yes Included14 Nov 1988 Westinghouse – CNFD – – M Yes Excluded2 Nov 1989 Xerox – BP&S Yes Yes M Yes Included10 Oct 1990 Federal Express Yes Yes S Yes Included10 Oct 1990 General Motors – Cadillac – – – – Excluded10 Oct 1990 IBM Yes Yes – – Excluded9 Oct 1991 Solectron Yes Yes M Yes Included11 Nov 1993 Zytec Yes Yes – – Excluded14 Oct 1992 Texas Instruments – DSEG Yes Yes M Yes Included14 Oct 1992 AT&T – UCS & TSBU – – M/S Yes Excluded24 Apr 1995 RitzCarlton/Marriott Yes Yes – – Excluded14 Dec 1993 Eastman Chemical – – – – Excluded18 Oct 1994 AT&T – CCS – – S Yes Excluded18 Oct 1994 GTE Directories Yes Yes S Yes Included16 Oct 1995 Armstrong – BPO – – M Yes Excluded16 Oct 1995 Corning – TPD Yes Yes M Yes Included16 Oct 1996 ADAC Yes Yes M Yes Included16 Oct 1996 Dana – – S Yes Excluded15 Oct 1997 Xerox Business Systems – – – – Excluded15 Oct 1997 Minnesota Mining and Manufacturing – – – – Excluded15 Oct 1997 Merrill Lynch – – – – Excluded15 Oct 1997 Solectron Corp Yes Yes – – Excluded17 Nov 1998 The Boeing Company Yes Yes – – Excluded
�Companies over performing the market return on the day of announcement according to Treynor’s and Jensen’s Index.��Industry types with M for manufacturing and S for services sectors.���Companies included in Ramasesh’s (1998) study.
21
4J.
E.
T.
Ch
eah
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
model by rendering itself to a special case of the ARFIMA model. The stochastic process Xt
is said to be both invertible and stationary if the roots of F(B) and Q(B) are outside of the
unit circle and the value of d , j0.5j. However, the process is said to be non-stationary for
d � 0.5 due to the infinite variance it possesses (Granger & Joyeux, 1980). For d [ (20.5,
0.5) and d = 0, Hosking (1981) demonstrated that the correlation function, r (.) is pro-
portional to g 2d – 1 as g! 1 and the autocorrelations of the ARFIMA process decay
hyperbolically to zero as g! 1, contrary to the faster geometric decay of a stationary
ARMA process. For d [ [0.5,1), the finite process is mean reverting and the series,
which is stationary, would fluctuate around a constant long run mean and the variance is
finite time-invariant. As such, shocks on a mean-reverting series should necessarily be tran-
sitory and dissipate over time as there is no long run impact of such an innovation to future
values of the process. According to Maddala & Kim (1998), ARFIMA processes with
0 , d , 0.5 implies thatP
g¼2nn
j r (l)j diverges as n! 1, displays long memory (or
long-range positive dependence). Essentially, these processes are more persistent, which
suggests that the autocorrelation function is decaying much slower than for the correspond-
ing I(0) series with similar ARMA parameters. For d [ (20.5, 0), the process exhibits inter-
mediate memory, or long-range negative dependence. The ARFIMA process exhibits
explosive behaviour in the series and not mean-reverting when a shock to the process
causes the process to deviate away from its initial starting point, for a value of d . 1. For
d ¼ 0, the process possesses only short memory and corresponds to the standard ARMA
model (Barkoulas & Baum, 1996).
Geweke & Porter-Hudak (1983) (hereafter abbreviated GPH) proposed a semi-
nonparametric procedure to obtain an estimate of the fractional differencing parameter
d based on the slope of the spectral density function to test for long memory. As pro-
posed by Robinson (1995), this method is implemented with trimming and smoothing
options available. The regression is computed as follows:
Y (J)k ¼ bo þ b1Xk þ jl
(J)k k ¼ Lþ J, Lþ 2J, . . . M (3)
where
Xk ¼ �2log sin (lk=2)
and
Y (J)k ¼ log
XJ
j¼1
I(lkþj�J)
" #
I(lj) is the jth period gram point, and lj ¼ 2pj=T . Assuming that J is fixed, M and L should
diverge with sample size such that M=T ! 0 and L/M! 0. According to Davidson
(2005), if in doubt, these values should be set to 0 and 1 respectively. There is evidence
of long memory if the least squares estimate of d(dGPH) is significantly larger than
0. Long memory hypothesis is supported if the least squares estimate of dGPH is signi-
ficantly different from 0.
The results of applying the GPH test on first differenced natural logarithm data are
reported in Table 2. The unit root null hypothesis is tested against the long memory
Baldrige Award Announcement and Long Memory in Shareholder Wealth 215
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
alternative. Several values of dGPH are tabulated to check the sensitivity of the results.
p values were also computed and are given in parentheses below the estimates.
The results indicate that there is no long memory in any companies included in the study
for the 250 trading days after winning the MBNQA, except for one negligible occurrence.
The unit-root hypothesis cannot be rejected in favour of the long memory alternative
because the dGPHs are not significantly different from 0. These findings do not warrant
the use of ARFIMA models to examine behaviour of stock price dynamics and the empiri-
cal result is asymptotically robust to both the short-run dynamics and the underlying dis-
tribution of the series by construction of the test. By and large, this suggests that the
evidence of a unit root in the recipient companies is robust to fractional integration alter-
natives. Essentially, recipient companies failed to sustain the shareholder wealth after the
day of announcement in the long run and investors are recommended to sell stocks of reci-
pient companies shortly after the announcement of the winners of the MBNQA as their
newly generated wealth could not be sustained in the long run and this is not in direct
contradiction with the efficient market hypothesis in the semi-strong form.
Conclusion
Overall, this paper attempted to examine the long run sustainability of shareholder wealth
subsequent to the day of announcement of companies winning the MBNQA. The evi-
dence suggests that all the recipient companies did not exhibit long memory and there-
fore, it implies that the stock market is efficient in the semi-strong form with respect
to the successive one-period stock return or prices are independently distributed.
Evidently, there is no sustained increase in the shareholder wealth and companies con-
templating whether to invest their resources and efforts towards winning the MBNQA
should give up the idea as it will not lead to sustained wealth for shareholders long
after the bubble on the day of announcement. By and large, companies will probably
find that diverting their resources and energies into winning the MBNQA is futile or at
best wasteful, nor are they likely to convince their investors that the efforts will payoff
financially.
Table 2. Results of the Geweke–Porter-Hudak test for 250 trading days after winning the MBNQA
Recipient companies
GPH Motorola Xerox
Federal
express Solectron
Texas
instruments GTE Corning
ADAC
laboratories
D (0.45) 0.0583 0.1471 20.0753 0.1178 20.2821 20.0412 0.0414 20.4025p value (0.819) (0.565) (0.769) (0.645) (0.270) (0.872) (0.871) (0.116)D (0.50) 0.0358 20.0086 0.0478 20.1329 20.1195 20.0062 0.0985 20.3823p value (0.864) (0.967) (0.820) (0.527) (0.569) (0.976) (0.639) (0.069)D (0.55) 20.0029 20.013 0.0619 20.0949 20.1284 20.0372 0.0006 20.3728p value (0.986) (0.941) (0.724) (0.590) (0.465) (0.827) (0.996) (0.034)�
D(0.45), D(0.5) and D(0.55) give the d estimate corresponding to n ¼ T0.45, T0.5 and T0.55 and the ‘p value’ gives
the asymptotic probability for the null hypothesis (d ¼ 0) against the long memory alternative.�Asterisk indicates that the null hypothesis can be rejected at 5% level.
216 J. E. T. Cheah
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
Acknowledgments
The author would like to express his deepest gratitude to Professor David Morris and
Associate Professor Dr Inger Boyett from the University of Nottingham. He would also
like to thank Mr Wee Sang Jong for financial support and Mr Chuah Chong Hin for
research assistance. The usual disclaimer applies
References
Adam, G. et al. (1999) Revisiting the stock price impact on quality awards, Omega, 27, pp. 595–604.
Barkoulas, J. T. & Baum, C. F. (1996) Long-term dependence in stock returns, Economic Letters, 53,
pp. 253–259.
Cheah, E. T. (2005) A quality award and stock market reaction: evidence from Malaysia, Total Quality
Management and Business Excellence (forthcoming).
Davidson, J. (2005) Time series modelling version 4.10: User guide.
Diebold, F. & Rudebusch, G. (1989a) Long memory and persistence in aggregate output, Journal of Monetary
Economics, 24, pp. 189–209.
Diebold, F. & Rudebusch, G. (1989b) on the power of Dickey–Fuller tests against fractional alternatives, Econ-
omic Letters, 35, pp. 155–160.
Diebold, F. et al. (1991) Real exchange rate under gold standard, Journal of Political Economy, 99,
pp. 1252–271.
Docking, D. S. & Dowen, R. (1999) Market interpretation of ISO 9000 registration, The Journal of Financial
Research, 22(2), pp. 147–160.
Easton, G. S. & Jarrell, S. L. (1998) The effects of total quality management on corporate performance: an empiri-
cal investigation, Journal of Business, 71(2), pp. 253–307.
Fama, E. F. (1965) The behavior of stock market prices, Journal of Business, 38, pp. 34–105.
Fisher, C. et al. (2001) Economic impacts of quality awards: does offering an award bring returns to the state?
Total Quality Management, 12(7 & 8) pp. 981–987.
Garvin, D. A. (1991) Does the Baldrige Award really work? Harvard Business Review, November–December,
pp. 80–93.
Geweke, J. & Porter-Hudak, S. (1983) The estimation and application of long-memory time series model, Journal
of Time Series Analysis, 4, pp. 221–238.
Goh, T. et al. (2003) Impact of Six Sigma implementation on stock price performance, Total Quality Management
and Business Excellence, 14(7), pp. 753–763.
Granger, C. W. J. & Joyeux, R. (1980) An introduction to long-memory time series and fractional differencing,
Journal of Time Series Analysis, 1, pp. 15–29.
Greene, M. & Fielitz, B. (1977) Long-term dependence in common stock returns, Journal of Financial
Economics, 4, pp. 339–349.
Hendricks, K. B. & Singhal, V. R. (1996) Quality awards and the market value of the firm: An empirical inves-
tigation, Management Science, 42(3), pp. 415–436.
Hodgetts, R. M. et al. (1999) Quality implementation in small business: perspectives from the Baldrige Award
winners, SAM Advanced Management Journal, Winter, pp. 37–47.
Hosking, J. R. M. (1981) Fractional differencing, Biometrika, 68, pp. 165–176.
Ivey, M. & Carey, J. (1991) The ecstasy and the agony, Business Week, October 21, p. 40.
Lo, A. W. (1991) Long-term memory in stock market prices, Econometrica, 59, pp. 1279–1313
Maddala, G. S. & Kim, I. M. (1998) Unit Roots, Cointegration, and Structural Change (Cambridge: Cambridge
University Press).
Mandelbrot, B. (1971) When can price be arbitraged efficiently? A limit to the validity of the random walk and
martingale models, Review of Economics and Statistics, 53, pp. 225–236.
Martinez-Costa, M. & Martinez-Lorente, R. (2003) Effects of ISO 9000 certification on firms’ performance: a
vision from the market, Total Quality Management and Business Excellence, 14(10), pp. 1179–1191.
Peters, E. E. (1996) Fractal Market Analysis: Applying Chaos Theory to Investment and Economics (New York:
Wiley).
Przasnyski, Z. H. & Tai, L. S. (2002) Stock performance of Malcolm Baldrige National Quality Award winning
companies, Total Quality Management, 19(3), pp. 269–285.
Baldrige Award Announcement and Long Memory in Shareholder Wealth 217
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
Ramasesh, R. V. (1998) Baldrige Award announcement and shareholder wealth, International Journal of Quality
Science, 3(2), pp. 114–125.
Robinson, P. M. (1995) Log-periodogram regression of time series with long range dependence, The Annals of
Statistics, 23(3), pp. 1048–1072.
Sowell, F. (1990) Fractional unit root distribution, Econometrica, 50, pp. 495–505.
Sowell, F. (1992) Modeling long-memory behavior with fractional ARMA model, Journal of Monetary
Economics, 29, pp. 277–302.
Stratton, B. (1993) Why you can’t link quality improvement to financial performance, Quality Progress, 26(2),
p. 5.
Wilson, J. P. et al. (2003) An examination of the economic benefits of ISO 9000 and the Baldrige Award to man-
ufacturing firms, Engineering Management Journal, 15(4), pp. 3–10.
218 J. E. T. Cheah
Dow
nloa
ded
by [
Uni
vers
ity o
f B
irm
ingh
am]
at 1
7:56
10
Nov
embe
r 20
14
Recommended