A quality award and stock market reaction: Evidence from the European Union

The European Quality Award (EQA) is a form of recognition of the superiority of quality in the products and/or services produced by recipient companies within the European Union countries. The success in implementing quality programmes with a proven success record would enhance the corporate value of the recipient companies and would be well-received by the stakeholders, i.e. the investors and the corporate managers. The news of winning a quality award previously unanticipated by investors should lead to an immediate change in the stock price of the recipient company. This augurs well with one of the corollaries of the efficient market hypothesis posited by Fama (1965). This exploratory paper intends to investigate, using the event study methodology, the information content of recipient companies on the possibility of abnormal returns made in the announcement windows. Using the Corrado (1989) rank test, it was found that there is no information content in the announcement of the quality award.