THE FINANCIAL INFORMATION-CONTENT OF PERCEIVED QUALITY

The authors investigate whether movement in a firm's stock price, that is, a measure of firm value, is associated with information contained in perceived quality measures. In a model that also allows for the ef fect of economywide factors and a firm's return on investment, they fi nd a positive relationship between stock return and changes in quality perceptions. These results imply that the quality measure contains in formation, incremental to that reflected by current-term accounting me asures, about future-term business performance. They suggest that mana gers should convey information to the stock market, such as the brand' s quality image, useful in depicting the long-term prospects of the bu siness. By doing so, the stock market will rely less on short-term mea sures of business performance, and managers will be freer to undertake strategies necessary for ensuring the long-term viability of their fi rms.