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

Qingchen Feng, Qizhi Tao, Yicheng Sun and Masayuki Susai

Finance Research Letters, 2022, vol. 47, issue PA

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.

Keywords: Corporate name change; Investor mania hypothesis; Rational pricing hypothesis; G14; G34 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321004918

DOI: 10.1016/j.frl.2021.102526

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