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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 08 de 2015


The Links between the Companies` Market Price Quality and that of its Management

and Business Quality: A System Panel Data Approach

Dinis Santos
Faculdade de Economia da Universidade de Coimbra

Elias Soukiazis
Faculdade de Economia da Universidade de Coimbra e GEMF

This work uses a simultaneous equation system approach to analyze the relationship between the Management and Business Quality of companies and their market Price Quality. Using panel data we found that both the Management and the Business Quality of companies positively influence the Market Price Quality of the studied American companies. Additionally, variables like the actual position of the company Price Quality compared to the industry average, being on the top or the bottom, or the beta value of a company, also influence the market Price Quality of the respective company. It is shown that the system equation approach is the most appropriate to explain the linkages between Price, Business and Management Quality providing consistent estimates. Also, using ratings to express the three core variables in the system is the most adequate way to define the quality characteristics in terms of Price, Management and Business performance of the companies considered in this study.

JEL Classification: M16, M21, C33.

Keywords: Management and Business Quality, Market Price quality, Simultaneous Equations Approach, Panel Data.

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