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Fresh look or false advertising: Modeling of investor attention based on corporate name changes

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  • Feng, Qingchen
  • Tao, Qizhi
  • Sun, Yicheng
  • Susai, Masayuki

Abstract

Using the renaming of companies in the Chinese market, where managers are more likely to take advantage of cosmetic effects in an attempt to influence investors, we find that, during the announcement period, the stock price and trading activities both react positively to renaming, especially when it is for image improvement reasons. However, in the long run, renaming has negative BHARs (buy and hold abnormal returns). Over time, the market and investors overreact less to renaming. Companies with problematic financial performance and negative media coverage are more inclined to change their name. We offer new and more detailed evidence to support the rational pricing hypothesis, rather than the investor mania hypothesis.

Suggested Citation

  • Feng, Qingchen & Tao, Qizhi & Sun, Yicheng & Susai, Masayuki, 2022. "Fresh look or false advertising: Modeling of investor attention based on corporate name changes," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321004918
    DOI: 10.1016/j.frl.2021.102526
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    References listed on IDEAS

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    Cited by:

    1. Jungmi Park & Yoojin Shin, 2022. "Corporate Sustainability and Market Response According to the Name Change Strategy: Focusing on Korean IT Industry Firms," Sustainability, MDPI, vol. 14(19), pages 1-15, September.

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    More about this item

    Keywords

    Corporate name change; Investor mania hypothesis; Rational pricing hypothesis; G14; G34;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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