Assessment of the Impact of Internationally Recognized Quality Standards on the Business Performance of Firms in Sri Lanka

Abstract

Internationally recognized quality standards are obtained by many firms in Sri Lanka with the intention of enhancing their corporate reputation. A question prevails whether this decision ultimately addresses the establishment's main financial objective of shareholder wealth maximization. The objective of this study was to examine whether there is a significant impact on the business performance of firms through certification and also to identify the factors that influence a firm to obtain international quality standards. Secondary data obtained from 606 firms were analyzed using a Treatment Effects Model to minimize the endogeneity bias. The results reveal that obtaining International quality standards has a significant positive profit effect on Sri Lankan firms. It also highlights that firms in the food industry are more likely to obtain certification than the non food sector. Experience of the top management and the size of the establishment have a significant positive influence towards certification.