Since 1987, 17 businesses have won the US Baldrige Quality Award,
established to promote awareness of quality management among US
businesses. Assesses the financial and competitive performances of these
17 companies. Previous research with respect to the quality‐performance
relationship has shown a positive relationship between quality
improvement and financial or market share performance. Finds that while
substantial improvements in operations performance characteristics among
Baldrige Award winners have coincided with the implementation of quality
improvement programmes, these improvements have not always resulted in
financial success. Firms should therefore view quality improvement
programmes as a method for building a strong competitive foundation, not
as a panacea guaranteed to result in economic health.
In this note we test the hypothesis that trading by tax-motivated individual investors is responsible for the January effect. We examine the ownership structure of a large sample of firms over a four-year period and find that the small firms that usually exhibit high January returns have low institutional ownership. After controlling for firm size, we still find that institutional ownership is significantly related to January abnormal returns. These results suggest that one reason the January effect may concentrate in small firms is because these firms are held by tax-motivated individual investors.
Our theory asserts that at low levels of ownership institutions may support management to preserve other business relations. At higher levels of ownership, institutions more actively monitor management because the gains from equity ownership exceed the cost of management review and of possible lost business. Corporate performance first decreases and then increases with the institution's ownership. Furthermore, the institutional ownership‐performance relation, especially the critical ownership level that separates management aligned institutions from efficiently monitoring ones, varies with management specific parameters (managerial effort disutility), firm specific parameters (firm size) and whether or not the institutional owner is pressure sensitive.
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