The long-run stock price performance of firms with effective TQM programs

This paper documents the long-run stock price performance of firms with eff ective Total Quality Management (TQM) programs. The winning of quality awar ds is used as a proxy for effective TQM implementation. We compare stock pr ice performance of award winners against various matched control groups for a five-year implementation period and a five-year postimplementation perio d. During the implementation period there is no difference in the stock pri ce performance, but during the postimplementation period award winners sign ificantly outperform firms in the various control groups. Depending on the control group used, the mean outperformance ranges from 38% to 46%. Our res ults clearly indicate that effective implementation of TQM principles and p hilosophies leads to significant wealth creation. Furthermore, our results should alleviate many of the concerns regarding the value of quality award systems. Overall, these systems are valuable in terms of recognizing TQM fi rms and promoting awareness of TQM.