Price reactions and the long-run performance to name change announcement: Evidence from Thailand
Post by MSF Chula at Tuesday, 8 August 2017 10:35 AM

Many empirical studies are elaborated by the literature to express the motivation of company
name change. However, the evidences are fail to uncover to support and not quite clear. Moreover,
signaling effect of the company name change announcement still suspect due to the unclear evidence
provides. So, this study aims to examine the short term price reaction and volume reaction to
company name change in Thailand during the period 1997-2009 in many aspects. I use an event study
methodology following Dodd and Warner (1983) to examine the price reaction around the
announcement date and examine abnormal turnover around the announcement date following
Michaely, Thaler, and Womack (1995). Furthermore, I investigate the long run stock performance
using a Buy-and-Hold model following Barber and Lyon, (1999) after the company name change
announcement for 3 years by using set index as a benchmark. The empirical result is found that there
are significantly positive abnormal returns in many subsamples. This means that the company name
change can create value and signal to investor about the firm future performance that manager intend
to convey that information to the investors. Moreover, since most of the reasons are come from M&A
and change in business that can officially see in the market and support with strong or clear reasons.
Furthermore, there are significantly negative abnormal return for unclear reason and small firm size
aspects. This cause from the market will doubt about the firms action and unclear reason disclosure
such as reputation reason. So, the clear or unclear reason disclosure from company name change
announcement has an effect to investors. However, no abnormal turnover is detected around the
announcement day means that if companies want to increase its visibility, company name change is
not the sensible choice. For the long run stock performance, I found significantly negative buy and
hold abnormal return for minor name change, unclear reason and larger firm size subgroup. This can
be interpret that after 3 years announcement those firm still has bad performance and can’t conceal
their bad reputation and bad image after name change.

Last updated at Tuesday, 8 August 2017 10:35 AM