Banking on a Corporate Rebrand

Firms often rebrand to counter negative shocks, but can it work? Using a historical natural experiment, we analyze a large sample of companies from the same industry (banking) that shared very similar names, but overwhelmingly decided to change them in response to a common, negative news shock. U.S. entry into World War I in 1917 created a sudden antiGerman backlash against anything that invoked an association with the now enemy. The shock itself was thus orthogonal to bank fundamentals and pre-existing trends, but pushed banks to reconsider their brands. After 1917, the few German-named banks that kept their tainted names saw significant declines in assets, deposits, and market share relative to other banks. However, German-named banks that rebranded mitigated much of the negative shock. Specifically, German-named banks that adopted a new non-ethnic brand name avoided between 75% and 85% of the anti-German effect, and those that adopted a new patriotic brand name were able to neutralize it completely. Overall, we find that “crisis rebranding” paid off in our historical setting regardless of the chosen brand, with patriotic rebranding proving the most effective at offsetting the exogenous shock.