The Effect of Implementing Total Qualiy Management to Financial Performance of Firms

Based on 218 quality award winners’empirical data from Shanghai and Shenzhen Stock Exchange between 1997 and 2009, this study explores the hypotheses that implementing effective TQM programs improves the financial performance of firms. Based on those results we empirically test hypotheses that relate changes in financal performance associated with effective implementation of TQM to various firm characteristics. The characteristics examined are firm size, degree of capital intensity, degree of diversification, time of firm won quality awards. Event study and panel analysis are used.Our results show that firms that won quality awards, do better on sales growth and cost reducing than the other firms. There is no influence in improving firms’operation performance. Return of asset is evidently dropped. The changes of financial performance of quality award winners are different with companies’size, degree of diversification and time of awards won. In window periods sample firms that larger, low diversification and latter won quality awards have better financial performance than other sample firms.The aim of this paper is to provide suggestion to those firms that going to implement TQM .