The Long-Term Market Performance of UK Companies Following Corporate Name Changes

Abstract:     
This study investigates the predictive power of corporate name changes on companies' subsequent long-term stock market performance. Using a total sample of 803 name change events associated with companies that have been officially listed in the UK market during the period 1987 to 2002, we give evidence that on average, markets perceive the change of the corporate name as a negative signal regarding companies' future. This post-event long-term market underperformance is robust for companies with both positive and negative pre-event market performances and asymmetric between pre-event "best" and "worst" market performers. Our results are also supportive to the claim that the market reacts only slowly to the information content of a name change announcement.

Keywords: Name Change, Behavioural Finance, Market Performance, Underreaction Hypothesis

JEL Classifications: G14, G32

Working Paper Series