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

Autor: Aman Asija, Neelam Rani
Rok vydání: 2017
Předmět:
Zdroj: Global Journal of Flexible Systems Management. 18:173-181
ISSN: 0974-0198
0972-2696
DOI: 10.1007/s40171-017-0155-7
Popis: 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.
Databáze: OpenAIRE
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