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An Event Based Study on the Name Change Effect on A-Share Quoted Firm Values

Author

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  • Dejun Xie
  • Ziyue Yan
  • Yiyao Xu
  • Siyang Weng
  • Chirui Zhang

Abstract

Name change is not uncommon for businesses around the world. Previous researches focusing on developed markets showed mixed results on the relationship between equity valuation and corporate name changes. Such relationship poses a more baffling question in emerging markets with rapid economic and technological changes. Based on a sample of 150 companies which are quoted on Chinese A-Stock market and have changed the corporate name once between 2009 and 2019, the study investigates the impact of name change on companies’ stock performance in terms of abnormal returns. The results show that companies undergone name changes experience abnormal return fluctuations around announcement dates. Investors respond positively to name changes owing to merger and acquisition in the short term, while name changes because of restructuring or reputation could degrade firms’ market values. Name changes due to the change in business type generate no significant stock price reaction. From valuation management perspective, our findings indicate that name change serves more of a market signal to investors rather than an optimal value addition strategy to listing companies.  JEL classification numbers: M21, O14, Q01, Q56

Suggested Citation

  • Dejun Xie & Ziyue Yan & Yiyao Xu & Siyang Weng & Chirui Zhang, 2020. "An Event Based Study on the Name Change Effect on A-Share Quoted Firm Values," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 9(4), pages 1-11.
    • Handle: RePEc:spt:stecon:v:9:y:2020:i:4:f:9_4_11
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    References listed on IDEAS

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    1. Wu, YiLin, 2010. "What's in a name? What leads a firm to change its name and what the new name foreshadows," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1344-1359, June.
    2. Ernest N. Biktimirov & Farooq Durrani, 2017. "Market reactions to corporate name changes: evidence from the Toronto Stock Exchange," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 13(1), pages 50-69, February.
    3. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    4. Kot, Hung Wan, 2011. "Corporate name changes: Price reactions and long-run performance," Pacific-Basin Finance Journal, Elsevier, vol. 19(2), pages 230-244, April.
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    More about this item

    Keywords

    Corporate name change; Event study; Corporate Strategy; Market performance; Stock valuation.;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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