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Company name fluency, investor recognition, and firm value

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  • Green, T. Clifton
  • Jame, Russell

Abstract

Research from psychology suggests that people evaluate fluent stimuli more favorably than similar information that is harder to process. Consistent with fluency affecting investment decisions, we find that companies with short, easy to pronounce names have higher breadth of ownership, greater share turnover, lower transaction price impacts, and higher valuation ratios. Corporate name changes increase fluency on average, and fluency-improving name changes are associated with increases in breadth of ownership, liquidity, and firm value. Name fluency also affects other investment decisions, with fluently named closed-end funds trading at smaller discounts and fluent mutual funds attracting greater fund flows.

Suggested Citation

  • Green, T. Clifton & Jame, Russell, 2013. "Company name fluency, investor recognition, and firm value," Journal of Financial Economics, Elsevier, vol. 109(3), pages 813-834.
  • Handle: RePEc:eee:jfinec:v:109:y:2013:i:3:p:813-834
    DOI: 10.1016/j.jfineco.2013.04.007
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    4. Kevin M. Kniffin & Mitsuru Shimizu, 2016. "Sounds that make you smile and share: a phonetic key to prosociality and engagement," Marketing Letters, Springer, vol. 27(2), pages 273-283, June.
    5. Xing, Xuejing & Anderson, Randy I. & Hu, Yan, 2016. "What׳s a name worth? The impact of a likeable stock ticker symbol on firm value," Journal of Financial Markets, Elsevier, vol. 31(C), pages 63-80.
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    8. Helena Isidro & Márcia Sobral, 2015. "The Effects of Women on Corporate Boards on Firm Value, Financial Performance, and Ethical and Social Compliance," Journal of Business Ethics, Springer, vol. 132(1), pages 1-19, November.

    More about this item

    Keywords

    Company names; Fluency; Investor recognition;

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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