The Value of Management Control Systems: Evidence on the Market Reaction to ISO 9000 Quality Assurance Certification

Posted: 27 Feb 1998

See all articles by Shannon W. Anderson

Shannon W. Anderson

University of California, Davis - Graduate School of Management

J. Daniel Daly

University of Michigan at Ann Arbor

Marilyn F. Johnson

Michigan State University - Department of Accounting & Information Systems

Abstract

We study the link between firm value and quality management practices by examining stock price reactions to third party attestation that a firm's quality control process complies with ISO 9000 quality assurance standards. We find that ISO 9000 certification is motivated by international sales opportunities for attaining 'preferred supplier' status with manufacturing customers availability of alternatives for disclosing quality and costs of obtaining certification. Our analysis of wealth effects which addresses Lanen and Thompson's (1988) critique by controlling for investors' prior anticipation of certification indicates that factors which explain certification also explain cross-sectional variation in abnormal returns around the certification date. Additionally we find that firms voluntarily disclose information about ISO 9000 certification when certification is initiated by the firm but not when certification is in response to customer demands or regulatory requirements.

JEL Classification: G10, M11

Suggested Citation

Anderson, Shannon W. and Daly, J. Daniel and Johnson, Marilyn F., The Value of Management Control Systems: Evidence on the Market Reaction to ISO 9000 Quality Assurance Certification. Available at SSRN: https://ssrn.com/abstract=55443

Shannon W. Anderson (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

J. Daniel Daly

University of Michigan at Ann Arbor

500 S. State Street
Ann Arbor, MI 48109
United States

Marilyn F. Johnson

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-0152 (Phone)
517-432-1101 (Fax)

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