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Signaling Power of Corporate Name Change: A Case of Indian Firms

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  • Neelam Rani

    (Rajiv Gandhi Indian Institute of Management Shillong)

  • Aman Asija

    (Rajiv Gandhi Indian Institute of Management Shillong)

Abstract

In India, every year a large number of firms change their name. This raises a question that does name change convey any signal of better future prospects. The paper examines market response to name change announcements for firms listed on Bombay Stock Exchange. The paper also examines the predictive ability of firm-specific characteristics in determining the nature of market response to the name change announcement. The finding reveals positive and significant average abnormal returns around event date. An increase in cumulative average abnormal return few days before the announcement date has also been observed. Such a market reaction before the event day may be attributed to the leakage of information. The paper analyzes firm-level attributes of successful name changers. The results show that market risk and historical profitability are significant predictors of sign of abnormal return on day of the event. Positive relation of firm profitability with high abnormal return on the day of announcement indicates that in India a firm cannot break with past, by means of a name change. The announcement of new name change does not have positive signaling effect. Hence, the managers of loss-making firms should avoid consuming resources for signaling through business name change.

Suggested Citation

  • Neelam Rani & Aman Asija, 2017. "Signaling Power of Corporate Name Change: A Case of Indian Firms," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 18(3), pages 173-181, September.
    • Handle: RePEc:spr:gjofsm:v:18:y:2017:i:3:d:10.1007_s40171-017-0155-7
    DOI: 10.1007/s40171-017-0155-7
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    Cited by:

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    2. Pushpanjali Kaul & Sangeeta Arora, 2022. "Reinventing a brand’s identity: effect of name and logo announcements on the stock price of Indian banks," Journal of Brand Management, Palgrave Macmillan, vol. 29(3), pages 258-270, May.
    3. Yanhui Zhao & Roger J. Calantone & Clay M. Voorhees, 2018. "Identity change vs. strategy change: the effects of rebranding announcements on stock returns," Journal of the Academy of Marketing Science, Springer, vol. 46(5), pages 795-812, September.
    4. Said Arath Corrales Villegas, 2018. "Percepción de la imagen corporativa en una ONG en áreas rurales," Revista de Investigación en Ciencias Contables y Administrativas, Universidad Michoacana de San Nicolás de Hidalgo, Facultad de Contaduría y Ciencias Administrativas, vol. 4(1), pages 4-19, December.
    5. Samta Jain & Smita Kashiramka & P. K. Jain, 2018. "Impact of Organizational Learning and Absorptive Capacity on the Abnormal Returns of Acquirers: Evidence from Cross-Border Acquisitions by Indian Companies," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 19(4), pages 289-303, December.
    6. Said Arath Corrales Villegas, 2018. "Percepción de la imagen corporativa en una ONG en áreas rurales," Revista de Investigación en Ciencias Contables y Administrativas, Universidad Michoacana de San Nicolás de Hidalgo, Facultad de Contaduría y Ciencias Administrativas, vol. 4(1), pages 4-19, December.

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