Changing Business Name May Have Little Impact

Best corporate names are short and rarely contain geographical references or acronyms

The best corporate names are short, distinctive, and futuristic. They rarely contain geographical or product references, nor acronyms. Futuristic names or coined words can earn the value of longevity, which is the key to name recognition. United Communications’s adoption of ‘Sprint’ is a good example.

https://go.gale.com/ps/i.do?id=GALE%7CA17743174&sid=googleScholar&v=2.1&it=r&linkaccess=abs&issn=00076813&p=AONE&sw=w&userGroupName=anon%7E1cead7f0

Name changes have less effect on returns for established firms; the market prefers specific names without geographical significance

Based on a sample of 415 Indian firms from 2005 to 2014, this study suggests that investors respond positively to the announcement of firm name changes. Furthermore, the study indicates that when firms do not indicate geographical specificity in the name and have a specific rather than generic name, then the firm will experience greater abnormal returns. Also, when firm names are fluent and are associated with the owner’s family name, again, abnormal returns generated are positive. Nevertheless, as a firm ages and investors gain more information about it, then abnormal returns due to name change decrease.

https://www.tandfonline.com/doi/abs/10.1080/13571516.2016.1253186

College name changes have no significant impact on enrollment

Many colleges and universities in the United States have resorted to using proven business marketing strategies to better market themselves. The practice of changing a firm’s name to send a signal and to broaden consumer appeal is one such strategy. It is an expensive and controversial strategy when used by schools, but is it also effective? We hypothesize that an effective name change strategy will positively impact a school’s enrollment. Using the time series quasi design approach, we analyzed the pre-event and post-event incremental change in enrollment on a sample 140 colleges and universities. We used a five-year pre-event and a five-year post-event analysis period. The results show that, on average, the strategic name change has no significant impact on the post-event enrollment patterns. The t-value is 1.61. A further analysis of the incremental enrollment patterns of the individual schools, shows that only 10 (about 7%) of the sample experienced significant incremental change in post-event enrollments (significance level of 5%, a two-tailed test). Hence, college administrators who are contemplating using the strategy as a marketing tool to boost declining enrollments are advised to proceed with extreme caution.

https://www.tandfonline.com/doi/abs/10.1300/J050v08n02_05

Corporate name changes have very weak effect on stock valuation and do not significantly affect earnings growth

We find that evidence of a positive stock price reaction to the announcement of a name change is very weak and is sensitive to sample selection. We interpret the evidence as a caution against the popular opinion that corporate name changes have significant valuation effects. We also find little evidence that corporate name changes correspond to changes in a firm’s stock return covariability with its industry index or changes in the firm’s earnings growth rate. These results cast doubt on two purported motives for name changes: that they convey information to the market about changes in the firm’s line of business or that they signal management’s private information about the firm’s future performance. Corporate name changes may serve useful purposes, but such purposes have small valuation effects or tend to be anticipated by investors.

https://www.sciencedirect.com/science/article/abs/pii/0378426694000581

Name changes to provide clarity or improve reputation generate no stock price reaction or operating performance changes

Stock price reactions and long-run performance after a corporate name change are investigated using a sample of Hong Kong listed companies spanning 1999 to 2008. Corporate name changes are classified into four types. Investors react positively around the announcement date to changes announced as being due to a merger or acquisition, a restructuring or a change in business type. Name changes to provide clarity or for reputational reasons generate no stock price reaction. No abnormal trading activity is detected around the announcement and in the post-event period. There is very weak evidence of a relationship between long-run abnormal stock returns, operating performance changes and corporate name changes. The results suggest that name changes have short-term stock price effects but no long-term relationship with stock price or operating performance.

https://www.sciencedirect.com/science/article/pii/S0927538X10000648

Companies who market heavily receive greater stock market rewards for changing their names; Those who change names before rather than after changing scope also fare better

Our study of name change announcements by 180 publicly listed U.S. firms reveals that marketing-related factors play a critical role in the value of corporate name changes: Firms with high marketing influence in their C-suite, high marketing investments, and high marketing capability receive greater stock market rewards for changing their names. Firms that change their names to leverage a strong brand in their portfolio, or to proactively communicate a change in their scope of business (i.e., a future change in their product portfolio or geographical markets), are also rewarded more than firms that change their names to retroactively align their names with a new scope.

https://www.sciencedirect.com/science/article/abs/pii/S0148296314002380

When made to improve image, major corporate name changes positively impact stock price while minor changes do not

This dissertation makes its primary contribution to the study of corporate name changes by finding that corporate name changes related to a change in corporate image will have a positive impact on stock price whereas corporate name changes related to a change in corporate entity will not. Moreover, it finds that major changes to the corporate name during corporate name changes related to a change in corporate image will have a positive impact on a firm’s stock price whereas minor changes to the corporate name during corporate name changes related to a change in corporate image will not. Finally, it is the first study to examine the effect of corporate name changes on firms’ brand names and finds that non-brand name altering corporate name changes related to a change in corporate image will have a positive impact on a firm’s stock price whereas brand name altering corporate name changes related to a change in corporate image will not.

https://oaktrust.library.tamu.edu/handle/1969.1/ETD-TAMU-1830

Small negative effect on returns found for corporate name changes, especially those deemed major

We analyse a sample of 107 listed Australian companies that changed their name over the period January 1995 to December 1999. We conduct separate analysis of firms having ‘major’ versus ‘minor’ name changes; of firms with coincident financial restructuring versus firms without restructuring; of small firms versus large firms and of dotcom firms versus non‐dotcom firms. Generally, we find some evidence of a negative association between the corporate name change event and abnormal returns. This seems particularly the case for those companies whose name change is deemed to be ‘major’.

https://www.emerald.com/insight/content/doi/10.1108/01140580410818469/full/html

Name changes have a modest and temporary positive impact on stock price

The stock return behavior of firms that change their names is investigated. The analysis shows a positive stock-price reaction to name change announcements by firms who have recently undergone major corporate restructuring. However, these effects are largely canceled in the post-announcement period. Thus, the valuation effects of name changes are only modest and transitory.

https://www.jstor.org/stable/3665798

Corporate name changes generally have no impact on shareholder wealth unless accompanied with corporate restructuring

Firms who announce a name change with other decisions and who who regularly release news fare better in subsequent price-earning ratios

Investigates the effectiveness of corporate name change signaling in the services industry. Argues that previous studies on the subject are lacking because they failed to distinguish between the services and manufacturing sectors. Uses the trend analysis method and examines the movement of price‐earning ratios during a five‐year period before and after the name change. Evaluates the effectiveness of the name change signaling strategy by testing the difference in means of the “before and after” P/E ratios. Finds that firms who announce name change together with other managerial decisions and regularly release news on other firm‐specific activities fared much better than firms which did not release such information.

https://www.emerald.com/insight/content/doi/10.1108/08876049710187491/full/html

A name change itself does not have a positive signaling effect, rather historical profitability predicts positive stock market return 

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.

https://link.springer.com/article/10.1007/s40171-017-0155-7

Bank rebranding has no effect on customer satisfaction, loyalty or perceived service quality

The study examined whether or not the rebranding activities in the Ghanaian banking industry, had any influence on customers’ perception on service quality, their level of satisfaction and their level of loyalty. These relationships were ascertained by running a moderation and linear regression analyses. The study identified that, rebranding had no statistically significant effect on perceived service quality, customer satisfaction and customer loyalty, in the Ghanaian banking industry. Rebranding had no moderating effect on the relationship between service quality and customer satisfaction. It also had no moderating effect on the relationship between service quality and customer loyalty. And finally, rebranding did not have a moderating effect on the relationship between customer satisfaction and customer loyalty. It was concluded that, rebranding activities in the Ghanaian banking industry had no significant effect on customers’ attitude towards the brand. Banks and other financial institutions must therefore be circumspect when it comes to investment in rebranding activities and be more interested in making investments that will positively influence the attitude of their customers.

https://www.tandfonline.com/doi/full/10.1080/23311975.2017.1413970