Does Quality Matter? A Study of Stock Price Reactions and the Implications for Healthcare Organizations

Kevin D. Broom, Jason S. Turner, Stephen D. Schwab, Michael P. Pesely

Abstract


Using the quality-competitive advantage-financial performance frameworks of Kroll, Wright & Heiens (1999) and Lakhal (2009), we analyze investor perceptions of how healthcare quality impacts financial performance.  Using stock pricing data from U.S. financial markets, we use event study methodology to analyze how investors interpret information signals regarding the quality of care that healthcare organizations provide.  Our findings are inconclusive that markets interpret higher quality healthcare will lead to a sustained competitive advantage and improved financial performance.  However, our findings indicate markets may interpret that lower quality healthcare could lead to a sustained competitive disadvantage and decreased financial performance.  We discuss the implications for executives, industry leaders, and policy makers.


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References


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