Company Financial Performance and ISO 9000 Registration: Evidence from Malaysia

Abstract

This study investigates factors, including ISO 9000 registration, that impact on corporate performance, in a sample of Malaysian companies. To achieve this objective, the annual reports of 162 companies (81 ISO 9000 accredited companies and 81 non-ISO accredited companies) were collected and a performance evaluation model was estimated. The results of the analysis revealed that factors such as ISO 9000 registration, return on assets (ROA), economic value added (EVA) and industrial category (INDCAT) determine corporate performance.

Keywords:

• economic value added
• financial performance
• SO 9000
• listed company; Malaysia
• quality

Acknowledgements

The authors wish to thank the four anonymous reviewers for the valuable comments and suggestions they made on an early version of the article.

Notes

¹ The performance of companies in developing countries might be affected by qualitative (non-financial) measures including planning, management style of leadership, structure of board of directors, government ownership, etc. However, these measures are difficult to quantify and beyond the scope of this article.

² It should be emphasized that several studies that investigate corporate performance have been undertaken in Malaysia (Idris, 1996; Loo et al., 2000; Murugesh et al., 2001). These studies, however, do not focus directly on ISO 9000 but adopt different approaches from that used in the current study.

³ Organizational configurations can be defined as commonly occurring clusters of attributes of organizational strategies, structures and processes (Miller, 1987; Miller & Mintzberg, 1983; Mintzberg, 1990)

⁴ See for example, Sim and Koh (2001), Kaplan and Norton (1992), Kearney (2001), Light (1998), Spinard and Sutter (1996), Corbett et al. (2002).

⁵ See for example, Kay and Davis (1990), Burton (1994), Bhimani (1993), and Pat (1995).

⁶ ISO 9000 was introduced in 1986. By December 2002, it had been adopted by over 400,000 companies worldwide.

⁷ ISO 9000 accreditation in Malaysia commenced in January 1993 with 122 companies being registered by the end of that year. By December, 1997 (just after the financial crisis, there were 1,610 ISO 9000 registered companies, and by December, 2001 a total of 3,195 companies had been registered in Malaysia (see ISO Survey, 2002).

⁸ The choice of these companies was based on their listing status. All companies registered on the ISO 9000 and listed on the KLSE formed the sample of this study. The non-registered ISO 9000 companies were chosen randomly from the best performing companies in terms of turnover listed on the KLSE.