The Effects Of Company Rename On Stock Prices And Operating Performance

In the Chinese stock market,the development of a company will be affected by many factors,such as the economic situation of the society and the policy background of the country,the product value and sales strategy of the company,the ability of the employees and the cultural atmosphere of the enterprise and so on.As the most basic and intuitive presentation of a company in the market,the quality of the name will directly affect the company's image and the company's attraction.It can be said that for listed companies,the company name is a manifestation of its own business,and a good name can better help the company win the favor of the market.Therefore,the company name can be regarded as an intangible asset of the company.Since the emergence of the first renamed company in the market in the 1990 s,the renaming behavior of listed companies in the Chinese stock market has emerged one after another,and there have been many times renaming booms.In the development process of listed companies,the company name is often changed due to various motives,such as the change in the company's business scope,mergers and acquisitions,and reputation.Although name change is only an inevitable result of important economic activities within the company,the announcement of the renaming will send relevant information to the market,and the market will have some reaction.The main research of this paper is analyzing stock price reactions and long-run performance after a corporate name change.The main research method is the event research method,which studies the overall situation of all listed companies changed from 1991 to 2017,select all the listed companies in Chinese stock market during the period of 2010-2017 as a sample to analyze the reasons for the company's name change.It is classified into five types: business scope change,mergers and acquisitions,strategic adjustment,reputation change and other reasons.On this basis,analyzing stock price reactions and long-run performance due to difference reasons.In the study of stock price,the paper analyzes the effect in the short-term and long-term.In the short-term study,the article calculates the abnormal return rate of the company by market adjustment model and market model,under the market adjustment model,it mainly explores whether the mean cumulative abnormal return has significant difference in each event interval within 60 days before and after rename event.Under the market model,it is mainly studied whether the cumulative excess return is significantly different from zero in the event window of the five days before the event to the 60 days after the event.Then analyzing the long-term impact of the name change event on the stock price of listed companies.In studying the impact of the rename event on the company's business performance,this paper selects ROA,ROE,EPS and main business income as the financial indicators to evaluate the company's basic business performance.This paper selects four financial indicators: Return on Assets(ROA),Rate of Return on Common Stockholders' Equity(ROE),Earning Per Share(EPS)and main business income to evaluate the company's basic business performance.By getting the date of ROA,ROE,EPS and main business income in the three years before and after the event,analyzing the mean change of each index,and performing a differential T test on the mean values of the indicators in the three event window periods of 3 years,2 years,and 1 year before and after the change of name to find whether there were significant differences between them.Then it will be better explain the impact of the listed company's name change on the basic operating performance.Through empirical research and analysis,this paper mainly draws the following conclusions:(1)Companies change name has short-term pricing effect on the stock price,especially in the companies' with changing business scope and mergers and acquisitions.(2)The long-term impact of the company's name change on the stock price is different for companies of various types are not the same.(3)The Chinese stock market has early reaction and overreaction to the occurrence of the company name change event.(4)There has been information disclosure in the Chinese stock market.(5)The effect of company name change on the business performance is not significant,but it will increase the company's main business income.Based on the above empirical results,this paper puts forward the following policy recommendations:(1)In terms of investors,it is necessary to maintain rationality when the companies change their name,strengthen information recognition capabilities,and not blindly follow the trend.(2)In terms of listed companies,it should pay attention to the substantial development of the company,and realize that just change the name cannot solve the actual problems of the company.(3)In terms of regulatory authorities,the market regulation must be strengthened and the market supervision system should be improved.