Meta-Standards and Order-Qualifiers: An Event Study of the Impact of ISO 9000 Certification on the Market Value of a Firm

Abstract

While ISO 9000 has been shown to improve internal metrics of firm performance, external measurements may be unaffected. This thesis examines the economic value of ISO 9000 by assessing the equity returns and risk parameters of 204 firms certified between 1999 and 2002 and is the first to examine the economic effects of ISO 9001:2000 versus the superseded 1994 standards. The complete sample experienced no significant changes in stock price or idiosyncratic risk. The market value of small firms increased between 0.63% and 0.85% and is significantly more positive than the reaction of large firms. The market value of ISO 9001:2000 registered firms increased between 0.98% and 1.20%, which is significantly more positive than the market reaction to ISO 9000:1994. Small firms also experienced a market value increase during the calendar quarter following ISO 9001:1994 certification, but industry-wide movements could be an extenuating factor. Because these results suggest that on average ISO 9000 is not associated with positive stock price performance, managers must justify the associated implementation costs by other means. However, those financial justifications may have greater credence for smaller firms. Furthermore, the financial payoff may be greater if a firm becomes certified to a more stringent quality standard or a replacement for incumbent and less strict guidelines.