Stock market reaction to Malcolm Baldridge National Quality Award announcements: does quality pay?

Since its creation, the Malcolm Baldridge National Quality Award (MBNQA) has had a significant influence on many US organizations, particularly so for companies embarking an or continuing with quality improvement efforts. It is generally considered to be the most prestigious quality award in the US. This paper examines the impact it has had on the stock performance of its recipients. The National Institute of Standards and Technology, which administers the award, and others who have tracked the stock performance of MBNQA winners, claim returns far in excess of the S & P 500. However, these spectacular returns were calculated without adjusting for market and industry factors and were not annualized, which is not correct from a financial point of view. This paper performs an event study to investigate the reaction of the stock market to MBNQA announcements; and determines the impact of the MBNQA on the stock market performance of its recipients by adjusting for market and industry effects and by calculating annualized returns.