International Journal of Managerial Finance

Market reactions to corporate name changes: evidence from the Toronto Stock
Exchange
Ernest N. Biktimirov Farooq Durrani
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Ernest N. Biktimirov Farooq Durrani , (2017)," Market reactions to corporate name changes: evidence
from the Toronto Stock Exchange ", International Journal of Managerial Finance, Vol. 13 Iss 1 pp. 50 -
69
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IJMF
13,1
50
Received 12 August 2015
Revised 20 April 2016
Accepted 2 May 2016
Downloaded by University of Florida At 21:37 22 January 2017 (PT)
International Journal of Managerial
Finance
Vol. 13 No. 1, 2017
pp. 50-69
© Emerald Publishing Limited
1743-9132
DOI 10.1108/IJMF-08-2015-0154
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1743-9132.htm
Market reactions to corporate
name changes: evidence from the
Toronto Stock Exchange
Ernest N. Biktimirov and Farooq Durrani
Goodman School of Business, Brock University,
St Catharines, Canada
Abstract
Purpose – The purpose of this paper is to examine stock price and trading volume reactions to name
changes of the Toronto Stock Exchange listed companies. Previous studies present conflicting evidence on
reactions to corporate name changes in US and other capital markets.
Design/methodology/approach – This study uses the event study methodology to calculate abnormal
returns and trading volume around the announcement, approval, and effective dates of corporate name
changes. It also contrasts abnormal returns between major and minor name changes, signaling focused and
diversified strategies, accompanied with a ticker symbol change and without a ticker change, structural and
pure name changes, as well as brand adoption and radical name changes.
Findings – Companies tend to experience a significant run-up in stock price in the period preceding the
announcement of a name change. The stocks also show a significant positive abnormal return around the
effective date. In addition, corporate name changes are associated with significant increases in trading
volume for several days starting from the approval date. Most importantly, the type of a name change
matters, as reflected in significance levels of abnormal return and trading volume reactions to various types
of corporate name changes.
Research limitations/implications – The limitation of this study comes from the difficulty to precisely
identify the date when the market learns about a possible corporate name change.
Originality/value – This study is the first to examine market reactions to name changes of Toronto Stock
Exchange listed companies. Most importantly, whereas previous studies focus on the announcement day, this
paper also considers the approval and effective days. It also contrasts responses between name changes
accompanied with a new ticker and name changes without a ticker change.
Keywords Abnormal return, Canadian companies, Trading volume, Event study, Name change,
TSX-listed firms
Paper type Research paper
1. Introduction
Each year many companies change their name. Well-known examples include Apple, which
dropped the “computer” from its name in 2007 to reflect a more diverse product line, and
Canadian technology leader Research in Motion, which switched its name to BlackBerry in
2013 to capitalize on the name recognition of its flagship product.
Despite significant costs associated with a corporate name change, its impact on a stock
price is not clear, and finance research tends to provide conflicting evidence. For example,
Howe (1982) does not find a significant relation between a name change and a stock price for
US companies. Bosch and Hirschey (1989) and Karpoff and Rankine (1994) document
transitory positive effects. In contrast, Cooper et al. (2001) report a positive permanent
impact of changing to a dot.com name for companies during the internet boom.
Interestingly, Cooper et al. (2005) show large stock price gains for firms removing the
dot.com from their name during the subsequent internet bust period.
Studies on the impact of a corporate name change on stock prices in capital markets
outside of USA also produce mixed results. For example, for major name changes,
Mase (2009) and Göttner and Limbach (2011) report transitory positive abnormal returns for
UK and German companies, respectively. Conversely, Josev et al. (2004) find a negative
abnormal return for Australian companies.
 This study extends literature in several directions. First, it appears to be the first to Market
examine market reactions to name changes of Canadian companies. Second, whereas previous reactions to
studies focus on the announcement day, this paper considers three event days: the corporate
announcement, approval, and effective dates. Third, this study compares stock price reaction
between different types of name changes. For example, it contrasts responses between name name changes
changes accompanied with a ticker change and name changes without a ticker change.
This paper is organized as follows. Section 2 discusses prior literature on stock market 51
reactions to corporate name changes. Section 3 describes sample selection. Sections 4 and 5
present methods and results for short-term abnormal return and trading volume analyses,
respectively. Section 6 discusses long-term abnormal returns. Finally, Section 7 concludes
with a brief summary of main results.

2. Prior literature
2.1 Studies based on US firms
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Starting from Howe (1982), the literature on stock price reactions to corporate name changes
has been growing for several decades. Howe examines stock price changes of 121 New York
and American stock exchange listed firms that change their names in the 1962-1980 period
on different dates, such as the announcement in the Wall Street Journal and shareholders’
approval date. Using weekly stock returns, Howe does not find significant stock price
changes on any event dates and concludes that “a name change is a financially neutral
event.” Karpoff and Rankine (1994) reach the same conclusion by analyzing corporate name
changes in the period 1979-1987.
However, several studies present different evidence. Specifically, Horsky and
Swyngedouw (1987) report a positive stock price reaction to corporate name changes by
examining 58 firms with pure name changes in the period 1981-1985. This positive effect is
larger for industrial and risky firms. In contrast, financial firms have a negative stock price
reaction. Bosch and Hirschey (1989) document a transitory valuation effects as a positive
market reaction to name change announcements is cancelled during a stock price decline in
the post-announcement period.
Researchers also find that the type of a corporate name change makes a significant
difference. For example, Morris and Reyes (1992) show that the more “distinctive” the new
name, the larger the chances that the name change will be associated with a positive stock
price reaction. By analyzing the largest sample to date of 1965 corporate name changes that
occurred in the 1980-2000 period, Wu (2010) finds that firms adopting the name of one of its
well-recognized brands experience a stock price gain.
Several studies focus on internet-related corporate name changes. Specifically, both
Cooper et al. (2001) and Lee (2001) find significant increases in stock prices for firms that
change their names to dot.com names around the announcement date. However, the
researchers offer different explanations for the observed abnormal returns. Cooper et al.
(2001) suggest the investor mania hypothesis by showing that these gains are not related to
the firm’s level of involvement with the internet. In contrast, Lee (2001) supports the
signaling hypothesis by finding a significantly larger stock price reaction for name changes
accompanied by other strategies than for cosmetic name changes. In a subsequent study,
Cooper et al. (2005) provide additional evidence of investor irrationality by reporting
significant and positive stock price gains for firms that remove the dot.com from their name
following the internet “crash” of mid-2000.
Researchers also disagree on whether the observed stock price reaction to corporate name
changes is permanent or temporary. Namely, Cooper et al. (2001) find a permanent stock price
increase for firms that change their name to dot.com names. In contrast, Karpoff and Rankine
(1994) show that any stock price gain disappears within a few trading days after the
announcement day. Bosch and Hirschey (1989) report transitory valuation effects as well.
 IJMF 2.2 Studies based on non-US firms
13,1 Studies that examine stock price reaction to corporate name changes in capital markets
outside of US present conflicting evidence as well. For example, whereas Josev et al. (2004)
find a significant stock price decline for Australian firms that undergo major name changes,
Mase (2009), Kot (2011), and Göttner and Limbach (2011) document a significant stock price
increase for UK, Hong Kong, and German firms with major name changes, respectively.
52 Similarly, while Josev et al. (2004) report a negative stock price reaction to corporate name
changes for small Australian firms, Gupta and Aggarwal (2014) find a positive stock price
reaction for small Indian companies.
Similar to the analysis of internet-related name changes of US companies, the examination
of corporate name changes of non-US companies produces mixed evidence as well.
Specifically, Josev et al. (2004) find a stock price decline for both dot.com and non-dot.com
name changes for Australian firms. In contrast, Berkman et al. (2011) document a stock price
gain for Chinese firms with internet-related name changes and no significant stock price
reaction for non-internet-related name changes.
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2.3 Analyses of trading volume and different event days

Although supplementing return-based measures with trading volume-based measures
increases the power of analysis to detect market reaction (Cready and Hurtt, 2002), only two
studies examine trading volume changes around corporate name changes. Specifically,
Lee (2001) reports a significant increase in trading volume for dot.com name changes of US
firms that were preceded by internet-related acquisitions, closing of retail outlets, and
alliances with other internet firms. In contrast, Kot (2011) does not find abnormal trading
volume around the announcement and in the following period for corporate name changes
of Hong Kong listed firms.
Among all studies on corporate name changes in both US and non-US capital markets,
only two papers consider other event dates besides the announcement date. Namely, Howe
(1982) examines stock price changes on five event dates: the announcement date in the Wall
Street Journal, the date on which the Board of Directors considers the name change for the
first time, the date of mailing the proxy allowing shareholders to vote on the proposed name
change, the date of the meeting at which shareholders approve the name change, and the
date on which the name change becomes effective. Howe does not find significant stock
price changes for US firms on any of these event dates. Similarly, in addition to the
announcement date, Berkman et al. (2011) examine two other event dates in their study of
internet-related and non-internet-related name changes of Chinese firms: the preliminary
announcement date and the effective date of the change. The authors find that results for all
three event dates are similar: significant positive stock price reaction to internet name
changes and no significant reaction to non-internet name changes.
Taken together, the growing literature on corporate name changes tends to show
significant stock price reaction to corporate name changes. However, researchers find
conflicting evidence for different types of name changes for both US and non-US capital
markets. Very few studies address the liquidity issue in the corporate name change context
or consider other event dates besides the announcement date. To summarize, Table I
presents the sample period, size of the final sample, empirical methods, abnormal return
results for different subsamples, and main conclusions of studies on corporate name
changes. Panel A shows summaries for studies based on US firms, while Panel B − for
studies based on non-US firms.

3. Sample selection and data sources

We use monthly issues of TSX eReview to collect 490 corporate name changes and their
effective dates for companies listed on the Toronto Stock Exchange (TSX) from January
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Abnormal returns for different

Paper Period Final sample Methods/analyses subsamplesa Main conclusions

Panel A: studies based on US firms

Howe (1982) 1962- 121 firms with pure name Abnormal returns Total sample (‒) Based on weekly stock returns, no
1980 changes (a name change for non- significant market reaction to corporate
economic reasons) name changes
Horsky and 1981- 58 firms with pure name Abnormal returns Industrial goods firms (↑) Positive stock price reaction to corporate
Swyngedouw 1985 changes Regression analysis Risky firms (↑) name changes. This positive effect is larger
(1987) Consumer goods firms (‒) for industrial and risky firms. In contrast,
Durable goods firms (‒) financial firms have a negative stock
Financial firms (↓) price reaction
Bosch and 1979- 79 firms with corporate name Abnormal returns Major (‒) The valuation effects of name changes are
Hirschey 1986 changes Descriptive statistics Minor (↑) modest and transitory
(1989) Prior restructuring (↑)
No prior restructuring (‒)
Morris and 1979- 28 firms with “pure” name Abnormal returns Distinctive (↑) The more “distinctive” the new name, the
Reyes (1992) 1985 changes Regression analysis Relevant (‒) larger the chances that the name change
Memorable (‒) will be associated with a positive
Flexible (‒) abnormal return
Positive (‒)
Karpoff and 1979- 147 corporate name changes Abnormal returns Total sample (‒) Evidence of a positive stock price reaction
Rankine 1987 Regression analysis is very weak and is sensitive to changes in
(1994) Stock’s beta the sample and selection of the event date
Firm’s earnings
Cooper et al. 1998- 95 firms that change their name Descriptive statistics Pure internet firms (↑) Firms that change their name to dot.com
(2001) 1999 to dot.com names Abnormal returns Prior involvement with internet names experience a large and permanent
(↑) stock price increase regardless of the firms’
Change in focus from non- level of involvement with the internet
internet to internet (↑)
Core business is not internet-
related (↑)
Lee (2001) 1995- 114 “.com” name changes Abnormal returns Strategic dot.com name change (↑) Firms that change their name to a dot.com
1999 Trading volume Image only dot.com name change name experience significant increases in
Regression analysis (‒) stock price and trading volume

(continued )
corporate
name changes

53
Market
reactions to

changes arranged by
Table I.

that examine
corporate name

year of publication
Summary of studies
 Downloaded by University of Florida At 21:37 22 January 2017 (PT)

54
13,1
IJMF

Table I.
Abnormal returns for different
Paper Period Final sample Methods/analyses subsamplesa Main conclusions

Cooper et al. 1998- 250 firms with internet-related Abnormal returns Dot.com added prior February Firms that change their name to a dot.com
(2005) 2001 name changes Regression analysis 2000 (↑) name during the internet boom period as
Dot.com removed after February well as firms that remove the dot.com from
2000 (↑) their name following the internet “crash” of
mid-2000 experience significant and
permanent stock price gains
Wu (2010) 1980- 1965 corporate name changes Descriptive statistics Brand adoption (↑) Stock price reaction is positive for firms
2000 Abnormal returns Narrower focus (↑) adopting the name of one of its well-
Regression analyses Broader focus (↑) recognized brands to associate with a good
Corporate events Radical name change (‒) performance. In contrast, announcement
Operating performance Miscellaneous reasons (‒) period returns are negligible and the post-
announcement period returns are negative
for firms adopting a radically different
name to disassociate from a poor
reputation
Panel B: studies based on non-US firms
Josev et al. 1995- 107 firms listed on the Abnormal returns Major name change (↓) Negative stock price reaction to corporate
(2004) 1999 Australian Stock Exchange Regression analysis Minor name change (‒ ) name changes especially for the firms with
Operating performance Name change with coincident major name changes
restructuring (↓)
Name change without
restructuring (‒ )
Largest firms (‒ )
Smallest firms (↓)
Dot.com firms (↓)
Non-dot.com firms (↓)
Mase (2009) 1994- 244 corporate name changes of Abnormal returns Major name change (↑) Positive stock price reaction to corporate
2004 firms listed on the London Stock Additional word is added (↑) name changes especially for the firms with
Exchange Word “group” is added (↓) major name changes and with deletion of
Word “group” is removed (↑) the word “group” from a company’s name

(continued )
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Abnormal returns for different

Paper Period Final sample Methods/analyses subsamplesa Main conclusions

Berkman et al. 1998- 81 internet-related and 134 non- Descriptive statistics Internet name change (↑) Chinese listed firms with internet-related
(2011) 2002 internet-related name changes of Abnormal returns Non-internet name change (‒) name changes experience smaller stock
firms listed on the Shanghai and Corporate events price gains compared to the US firms as
Shenzhen Stock Exchanges Operating performance reported by Cooper et al. (2001). In addition,
most of the value increase occurs
gradually prior to the announcement
Karim (2011) 2004- 83 corporate name changes of Abnormal returns Total sample (↑) Positive stock price reaction to corporate
2007 ‘Euronext Paris’ listed firms name changes
Kot (2011) 1999- 236 corporate name changes of Abnormal returns Merger and acquisition (↑) Positive stock price reaction to corporate
2008 Hong Kong listed firms Trading volume Restructuring (↑) name changes associated with a merger or
Operating performance Change in business (↑) acquisition, a restructuring or a change in
Reputation or clarity (‒) business type. No abnormal trading
Major name change (↑) volume is observed around the
announcement and in the post-event period
Göttner and 1997- 69 corporate name changes of Descriptive statistics Major name change (↑) Transitory positive stock price reaction to
Limbach 2009 German firms Abnormal returns Minor name change (↓) major corporate name changes. Managers
(2011) Regression analysis implement major name changes
Correlations to disassociate from prior poor
firm performance
Gupta and 2010- 55 corporate name changes of Abnormal returns Large-cap stocks (‒ ) Positive stock price reaction to corporate
Aggarwal 2012 National Stock Exchange and Mid-cap stocks (‒ ) name changes of small-cap firms
(2014) Bombay Stock Exchange Small-cap stocks (↑)
listed firms
Notes: aThe direction of abnormal returns is presented in parentheses, where “↑”, “↓”, and “‒” signs stand for positive, negative, and no reaction, respectively
corporate
name changes

55
Market
reactions to

Table I.
 IJMF 1997 to December 2011. For the collected name changes, we use the System for Electronic
13,1 Document Analysis and Retrieval (SEDAR), which is the electronic filing system for the
disclosure documents of issuers across Canada, and Lexis-Nexis databases to identify 411
announcement and 444 approval dates. It is difficult to determine the exact date on which
market participants can learn about a company’s intention to change its name. Studies that
examine name changes of US companies routinely use the date that the name change is first
56 announced in the Wall Street Journal as the announcement date. However, Karpoff and
Rankine (1994) report that the name change was mentioned or proposed in a proxy
statement before the Wall Street Journal announcement in 88 out of 147 cases. Similarly,
Cooper et al. (2001) note difficulty in obtaining exact announcement dates for many firms
in their sample. Therefore, they define the announcement date as the first available
information on the name change, whether from an announcement or effective trading date.
To avoid ambiguity and inconsistency, we use the date of the notice of the shareholders’
meeting that includes the consideration of a company name change as the announcement
date. We define the approval date as the date on which the name change is officially
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approved by shareholders. If this date falls on a non-trading day, then the next trading day
is used as the approval date. In our sample, the average period between the announcement
date and the approval date is 41 calendar days. The average period between the approval
date and the effective date is 42 calendar days.
This initial sample is reduced to a final sample of 274 announcement, 280 approval, and
359 effective dates after the application of three screens. The first screen removed firms
having potentially confounding announcements within five days surrounding an event date.
Examples of confounding announcements include earnings and dividends announcements,
intention to acquire, intention to reorganize the company, partial sale of business,
substantial loss provisions, and capital structure changes. The second screen removed firms
having more than 20 non-trading days in the 61-day event window around the
corresponding event date (e.g. announcement, approval, or effective date). The third screen
removed firms having less than 20 trading days in the pre-event estimation period, which
runs from –200 to –31 before the corresponding event date.
In addition to the examination of the total sample, we also analyze five pairs of
subsamples selected based on different types of name changes. The first subsample consists
of companies with major name changes, which result in completely different names.
Examples include a replacement of “CES Software” by “FUN Technologies” or a change
from “GTR Group” to “Mad Catz Interactive.” In contrast, the second subsample comprises
companies with minor name changes, which involve addition or deletion of some words,
such as switches from “Tahera” to “Tahera Diamond” and from “Western Canadian Coal” to
“Western Coal.”
The second pair of subsamples consists of name changes that signal focused or
diversified strategy. The examples of name changes that signal focused strategy include
changes from “Chesbar Resources” to “Jaguar Nickel” and from “Crew Development” to
“Crew Gold.” The cases of name changes that signal diversified strategy contain changes
from “Scandinavian Gold” to “Scandinavian Minerals” and from “North Atlantic Nickel” to
“North Atlantic Resources.”
The third pair of subsamples consists of name changes accompanied with a ticker
symbol change or without a ticker change. For example, when “Q-Zar” changed its name to
“Q-Entertainment,” it kept its old ticker QZR. In contrast, when “Internet Liquidators
International” changed its name to “Bid.Com International,” it also replaced its old ticker
“ILI” with a new ticker “BII.”
The fourth pair of subsamples comprises structural name changes, which were caused
by major corporate actions, such as a merger, acquisition, or product launch, and pure name
changes, which were not associated with any major corporate event.
 Finally, the fifth pair of subsamples contrasts brand adoption name changes with radical Market
name changes. Specifically, brand adoption name changes consist of major and minor name reactions to
changes in which a company explicitly stated brand name adoption as the main reason for a corporate
corporate name change. For example, in proxy circular for the 2001 annual meeting, the
management of Suzy Shier Limited provided the following reason for a name change to La name changes
Senza Corporation: “to better reflect the important development of the La Senza brand and
the growing emphasis on the La Senza group.” The great majority of brand adoption name 57
changes consist of major name changes. For example, among 30 brand adoption name
changes on the effective date, 28 are major and only two are minor name changes.
In contrast, radical name changes consist entirely of major name changes in which
company’s management did not mention brand adoption as a reason for a name change.
Table II summarizes the number of observations on the announcement, approval, and
effective dates for the total sample and each subsample. The number of observations for the
second (focused vs diversified strategy) and fourth (structural vs pure name change) pairs
are slightly smaller than the total sample size because the name changes that cannot be
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unambiguously classified into one of the subsamples are dropped. Brand adoption name
changes have the smallest sample size among all subsamples. The number of name changes
that signal focused strategy is almost twice as large as the number of name changes that
signal diversified strategy. The number of cases for subsamples of other pairs are split more
equally. For example, looking at the effective date for the third pair of subsamples, about
53 percent of name-changing firms simultaneously change their ticker symbols.
For comparison, Wu (2010) reports almost the same percentage − 55 percent for the
sample of US firms.
We obtain all security and market data from the Canadian Financial Markets Research
Centre (CFMRC) database and Bloomberg terminal.

4. Abnormal returns around the event dates

Following Berkman et al. (2011), Cooper et al. (2005), and Kot (2011), among others, we
compute market-adjusted abnormal returns ARj,t for firm j on day t around corporate

Event date
Subsample Announcement Approval Effective

First pair
Major name changes 154 156 196
Minor name changes 120 124 163
Second pair
Signal focused strategy 159 162 210
Signal diversified strategy 93 95 114
Third pair
New ticker symbol 149 156 189
Same ticker symbol 125 124 170
Fourth pair
Structural name change 147 146 190
Pure name change 124 130 164
Fifth pair
Brand name changes 22 26 30
Radical name changes 129 124 159 Table II.
Total sample 274 280 359 Final sample sizes
 IJMF name changes:
13,1 ARj;t ¼ Rj;t Rm;t (1)
where Rj,t and Rm,t are the daily stock and market returns on day t, respectively, and the
CFMRC value-weighted index is used as a proxy for the market return.
As a robustness check, we also compute abnormal returns by using the market model:
58

ARj;t ¼ Rj;t  a^ j þ b^ j Rm;t (2)

where a^ j and b^ j are parameters of the market model for firm j estimated by the market model
(3) over the estimation period that runs from −200 to −31 trading days before the
corresponding event date:
Rj;t ¼ aj þbj Rm;t þej;t (3)
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The mean cumulative abnormal return (CAR) over a time window (τ1, τ2) is calculated as:
X
t2
CARðt1 ; t2 Þ ¼ AR t (4)
t¼t1

where AR t is the sample mean abnormal return on day t. To estimate the significance of
abnormal returns, in addition to the parametric t-test, we compute two non-parametric tests,
which do not require a symmetrical distribution of security abnormal returns for correct
specification: the rank test suggested by Corrado (1989) and the sign test described by
Corrado and Zivney (1992) and Cowan (1992).
Table III presents average CARs for the total sample of companies changing their name
around the announcement (AD), approval (ApD), and effective (ED) dates. Panels A and B
show market-adjusted and market model CARs, respectively. As presented in Panel A,

Period n CARs (%) t-test Sign test Rank test

Panel A: market-adjusted abnormal returns

AD – 30, AD – 1 274 11.56 4.53*** 2.37** 1.64
AD – 1, AD + 1 272 0.18 0.22 −0.05 −0.23
AD + 2, ApD – 2 266 5.73 2.19** 2.73*** −0.13
ApD – 1, ApD + 1 278 0.82 1.13 −0.18 0.45
ApD + 2, ED – 2 274 3.78 1.40 −0.10 −0.05
ED – 1, ED + 1 354 2.09 3.45*** 3.18*** 2.31**
ED + 1, ED + 30 359 1.01 0.53 1.01 −0.78
Panel B: market model abnormal returns
AD – 30, AD – 1 274 6.90 2.73*** 2.36** 1.23
AD – 1, AD + 1 272 −0.27 −0.34 0.16 −0.18
AD + 2, ApD – 2 266 −0.41 −0.16 1.50 −0.14
Table III. ApD – 1, ApD + 1 278 0.06 0.08 −0.35 0.75
Average cumulative ApD + 2, ED – 2 274 −7.86 −2.90*** −1.96* −0.09
abnormal returns ED – 1, ED + 1 354 1.62 2.72*** 2.28** 2.28**
ðCARsÞ for the total ED + 1, ED + 30 359 −4.31 −2.28** −0.62 −1.30
sample of companies
changing their name Notes: The abnormal returns are computed for TSX-listed companies that change their corporate name in
around the announce- the period from January 1997 to December 2011. To estimate the parameters of the market model, the
ment (AD), approval estimation period runs from −200 to −31 trading days before the corresponding event date. The CFMRC
(ApD), and effective value-weighted index is used as a proxy for the market return. *,**,***Statistical significance at the 10, 5, and
(ED) dates 1 percent levels, respectively, using a two-tail test
 stocks experience a positive CAR of 11.56 percent in the 30-day period before the Market
announcement day (AD – 30, AD – 1) that is significant at least at the 5 percent level under reactions to
the t-test and sign test. Among the three event days, stocks gain, on average, an abnormal corporate
2.09 percent over a three-day period around the effective day (ED – 1, ED + 1). This CAR is
significant at least at the 5 percent level under all three tests. This gain seems to be name changes
permanent, as a non-significant 30-day CAR after the effective date (ED + 1, ED + 30) does
not suggest any price reversal. Stock returns also do not experience any significant changes 59
around the announcement and approval dates.
As shown in Panel B, abnormal returns computed using the market model confirm the
results reported in Panel A. Specifically, market model CARs show a price run-up in the
30-day period prior to the announcement date (AD – 30, AD – 1) that is significant according
to the t-test and sign test. In addition, market model CARs exhibit gains around the effective
day that are significant at least at the 5 percent level under all three tests. Similarly to
Panel A, market model CARs do not exhibit significant returns around the announcement
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and approval days.

Table IV presents average CARs for five pairs of subsamples. To save space, only
market-adjusted CARs are shown, as market model CARs are qualitatively unchanged.
Panel A shows that companies with a major name change gain, on average, an abnormal
18.86 percent during the 30-day period before the announcement date, and an additional
3.78 percent around the effective date. On the other hand, minor name changes are not
associated with significant abnormal returns. These results are consistent with Mase (2009),
Kot (2011), and Göttner and Limbach (2011) who document a significant stock price increase
for UK, Hong Kong, and German firms with major name changes, respectively.
Turning to Panel B, name changes that signal focused or diversified strategy tend to
show similar 30-day CARs of about 12 percent before the announcement date. However,
around the effective date, companies with name changes that signal focused strategy
experience a significant CAR of 2.50 percent, which is almost twice that of the CAR of
1.65 percent for companies with name changes that signal diversified strategy. Wu (2010)
also finds that corporate name changes that signal narrower focus are associated with twice
as large positive abnormal returns compared to the corporate name changes that signal
broader focus. Similar results are also reported by Mase (2009) who documents a positive
(negative) stock price reaction to corporate name changes that signal focusing (diversifying)
strategy by removing (adding) the word “group” from a company’s name.
CARs reported for name changes accompanied with a new ticker and with the same
ticker in Panel C are similar to those shown for major and minor name changes in Panel A.
Specifically, name changes accompanied with a ticker symbol change show significant
gains in the 30-day period before the announcement date and around the effective date,
whereas name changes accompanied with the same ticker do not display significant returns.
As Panel D shows, both structural name changes, which are associated with major
corporate actions, such as a merger, acquisition, or product launch, and pure name changes
show significant 30-day CARs prior to the announcement date. This price run-up, however, is
almost twice as large for structural name changes (14.98 percent) than for pure name changes
(7.99 percent). Similarly, while both structural and pure name changes experience positive
significant abnormal returns around the effective date, the magnitude of these gains is larger
for structural name changes (2.04 percent) than for pure name changes (1.66 percent).
Panel E shows average abnormal gains of 21.35 and 18.07 percent for brand adoption
name changes and radical name changes, respectively, over the 30-day period prior to the
announcement date. However, whereas radical name changes also experience a significant
CAR of 4.42 percent around the effective date, brand adoption name changes do not display
any significant returns around this date. For comparison, Wu (2010) finds significant
positive abnormal returns around the announcement date for brand adoption name changes
 IJMF CARs CARs
13,1 Period (%) t-test Sign test Rank test (%) t-test Sign test Rank test

Panel A: major vs minor name changes

Major name change Minor name change
AD – 30, AD – 1 18.86 5.08*** 3.48*** 2.05** 2.20 0.71 −0.35 0.17
AD – 1, AD + 1 0.70 0.60 −0.24 −0.06 −0.51 −0.52 0.19 −0.28
60 ApD – 1, ApD + 1 1.17 1.04 0.07 0.39 0.39 0.44 −0.35 0.23
ED – 1, ED + 1 3.78 4.06*** 2.55** 2.34** 0.07 0.10 1.92* 0.91
ED + 1, ED + 30 0.39 0.13 −0.25 −1.65 1.76 0.77 1.76* 0.61
Panel B: signal focused vs signal diversified strategy
Signal focused strategy Signal diversified strategy
AD – 30, AD – 1 12.62 3.75*** 2.20** 1.37 11.69 3.06*** 0.98 0.87
AD – 1, AD + 1 −0.33 −0.31 −0.50 −0.22 0.83 0.69 −0.07 −0.50
ApD – 1, ApD + 1 1.16 1.12 −0.47 0.27 0.47 0.38 0.03 0.08
ED – 1, ED + 1
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2.50 3.25*** 2.24** 1.79* 1.65 1.65* 2.35** 1.30

ED + 1, ED + 30 0.48 0.20 0.02 −1.63 2.90 0.91 1.59 1.10
Panel C: new ticker vs same ticker symbol
New ticker Same ticker
AD – 30, AD – 1 15.87 5.11*** 2.01** 1.74* 6.43 1.84* 1.32 0.63
AD – 1, AD + 1 0.97 0.99 0.45 0.45 −0.78 −0.70 −0.57 −0.73
ApD – 1, ApD + 1 0.82 0.75 0.09 −0.01 0.83 0.83 −0.38 0.69
ED – 1, ED + 1 3.73 3.93*** 2.78*** 2.34** 0.27 0.34 1.69* 0.93
ED + 1, ED + 30 −1.39 −0.46 −0.73 −1.88* 3.68 1.51 2.23** 0.79
Panel D: structural vs pure name changes
Structural name change Pure name change
AD – 30, AD – 1 14.98 3.99*** 1.98** 0.53 7.99 2.64*** 1.61 1.86*
AD – 1, AD + 1 0.69 0.58 0.40 −0.08 −0.56 −0.59 −0.47 −0.29
ApD – 1, ApD + 1 1.79 1.53 1.11 1.19 −0.21 −0.25 −1.57 −0.56
ED – 1, ED + 1 2.04 2.08** 2.62*** 2.09** 1.66 2.27** 1.91* 1.24
ED + 1, ED + 30 0.45 0.15 0.30 −0.35 0.94 0.41 1.04 −0.94
Panel E: brand adoption vs radical name changes
Brand adoption name change Radical name change
Table IV. AD – 30, AD – 1 21.35 2.53** 2.04** 1.65* 18.07 4.54*** 2.66*** 1.44
Average cumulative AD – 1, AD + 1 −2.32 −0.87 −0.95 −0.95 1.17 0.93 0.01 0.37
abnormal returns ApD – 1, ApD + 1 −0.13 −0.05 −0.44 −0.48 1.23 0.98 0.21 0.52
ðCARsÞ for ten
ED – 1, ED + 1 1.32 0.60 0.53 0.88 4.42 4.34*** 2.44** 2.10**
subsamples of
ED + 1, ED + 30 −2.82 −0.40 −0.02 −0.80 0.88 0.27 −0.42 −1.52
companies changing
their name around the Notes: The market-adjusted abnormal returns are computed for TSX-listed companies that change their
announcement (AD), corporate name in the period from January 1997 to December 2011. The CFMRC value-weighted index is used
approval (ApD), and as a proxy for the market return. *,**,***Statistical significance at the 10, 5, and 1 percent levels, respectively,
effective (ED) dates using a two-tail test

and negligible abnormal returns for radical name changes for US companies. A much
smaller sample size of brand adoption name changes for TSX-listed firms might contribute
to the difference in the results between TSX-listed and US firms.
Taken together, major name changes, name changes that signal a focused strategy, name
changes accompanied with a new ticker symbol, structural name changes, and radical name
changes experience significant abnormal returns of at least 12 percent in the 30-day period
before the announcement date and also gain an abnormal 2.0-4.4 percent around the
effective date. Pure name changes show a smaller price run-up of 7.99 percent prior to the
announcement date and a smaller gain of 1.66 percent around the effective date. Among all
subsamples, brand adoption name changes display the largest gain of 21.35 percent over a
 30-day period preceding the announcement date. However, they do not show significant Market
returns around the effective date. Minor name changes, name changes that signal a reactions to
diversified strategy, and name changes accompanied with the same ticker do not seem to be corporate
associated with abnormal returns.
name changes
5. Trading activity around the event dates
In this section, we analyze trading activity around corporate name changes. Two studies that 61
consider the liquidity issue in the corporate name change context report conflicting results.
Specifically, Lee (2001) finds significant increase in trading volume for dot.com name changes
of US firms, whereas Kot (2011) does not document abnormal trading volume around the
announcement and in the following period for the corporate name changes of Hong Kong
listed firms. To examine trading activity around corporate name changes of TSX-listed stocks,
we use two proxies: share trading volume and the number of transactions.
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5.1 Share volume

For change in share trading volume, we follow procedures described in Biktimirov
(2004). First, to approximate a normal distribution, we use a log transformation of the
volume data as suggested by Ajinkya and Jain (1989). Then we apply market and
mean volume adjustments. Specifically, to control for overall market fluctuations,
we divide log-transformed daily stock trading volumes by log-transformed daily
market volumes:
 
ln 1 þV j;t
V OLj;t ¼   (5)
ln V m;t
where Vj,t and Vm,t are the daily share volumes of the stock j and the market, respectively.
We add one to the daily share volume of individual stocks to avoid taking the log of zero.
The daily share volume of the S&P/TSX Composite index is used as a proxy for the market
trading volume.
Next we calculate the mean market-adjusted trading volume for each stock j during the
estimation period ðV OL j;estim Þ, which runs from day −200 to day −31 before the
corresponding event date:
X
1 t¼31
V OL j;estim ¼ V OLj;t (6)
170 t¼200
To analyze if trading activity changes around the corporate
 name
 changes, we calculate the
market-adjusted daily share trading volume ratio V OLRj;t for each stock as:
V OLj;t
V OLRj;t ¼ (7)
V OL j;estim
If there is no change in share trading volume on day t relative to the estimation period, the
expected value of this ratio is 1. Finally, the mean market-adjusted daily share trading
volume ratio ðV OLR t Þ for the sample of N stocks on day t is:

1X N
V OLR t ¼ V OLRj;t (8)
N j¼1
5.2 Number of transactions
To analyze change in the number of daily transactions (TRj,t), we use procedures similar to
those in Cready and Ramanan (1995). First, similar to the share trading volume analysis, we
 IJMF use a log transformation of the daily number of transactions (Tj,t) for stock j on day t to
13,1 approximate a normal distribution and add one to accommodate zero volume:
 
TRj;t ¼ ln T j;t þ1 (9)

We use the market model to calculate abnormal number of transactions:

62

ATRj;t ¼ TRj;t  baj þ b
b j TRm;t (10)

where ba j and b
b j are parameters of the market model for firm j estimated by the market model
(11) over the pre-event estimation period that runs from −200 to −31 trading days before the
corresponding event date, and TRm,t is the log-transformed number of transactions
occurring in all members of the S&P/TSX Composite index:
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TRj;t ¼ aj þbj TRm;t þej;t (11)

5.3 Trading activity changes

Table V presents the average share trading volume ratio ðV OLRt Þ and average abnormal
number of transactions ðATRt Þ for the total sample of companies changing their name
around the announcement, approval, and effective dates. Consistent with the abnormal
return results, stocks do not experience any significant change in trading volume around
the announcement date. However, they show a significant increase in share volume starting
on the approval date and on the following three days. The number of transactions also
increases significantly on the approval date and on the next two days. Turning to the
effective date, stocks show a significant increase in share trading volume prior to
the effective date. However, the number of transactions does not change significantly
around the effective date.
Table VI displays changes in share trading volume and number of transactions for five
pairs of subsamples. As Panel A presents, both major and minor name changes are
associated with significant increases in share volume and the number of transactions

Announcement date Approval date Effective date

Rank Rank Rank Rank Rank Rank
Day V OLRt test ATRt test V OLRt test ATRt test V OLRt test ATRt test

−5 1.34 1.62 0.37 1.20 1.25 1.89* 0.33 1.17 1.26 1.64* 0.28 0.96
−4 1.36 1.63 0.44 1.26 1.26 1.27 0.29 0.63 1.27 1.87* 0.32 1.22
−3 1.35 2.00** 0.43 1.37 1.25 1.38 0.30 0.66 1.28 1.61 0.32 1.12
Table V. −2 1.36 1.78* 0.40 1.17 1.26 2.06** 0.36 1.49 1.27 1.73* 0.32 0.98
The average share −1 1.34 1.45 0.33 0.90 1.24 1.31 0.33 1.10 1.29 2.03** 0.34 1.12
trading volume ratio 0 1.36 1.63 0.41 1.20 1.30 2.26** 0.42 1.99** 1.25 0.38 0.07 −1.24
ðV OLRt Þ and average 1 1.37 1.46 0.37 1.13 1.29 2.29** 0.45 2.11** 1.25 0.21 0.09 −1.02
abnormal number of 2 1.34 1.53 0.33 1.00 1.28 2.12** 0.42 1.64* 1.26 1.23 0.19 −0.17
transactions ðATRt Þ
3 1.33 1.61 0.34 0.62 1.28 1.88* 0.40 1.54 1.25 0.99 0.18 −0.30
for the total sample of
4 1.31 1.50 0.30 0.51 1.24 1.13 0.31 0.67 1.25 1.21 0.22 0.16
companies changing
their name around 5 1.34 1.77* 0.43 1.76* 1.25 1.31 0.30 0.63 1.24 0.86 0.21 0.39
the announcement, Notes: The share trading volume and number of transactions are computed for TSX-listed companies that
approval, and change their corporate name in the period from January 1997 to December 2011. *,**Statistical
effective dates significance at the 10 and 5 percent levels, respectively, using a two-tail test
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Announcement date Approval date Effective date

Day V OLRt Rank test ATRt Rank test V OLRt Rank test ATRt Rank test V OLRt Rank test ATRt Rank test

Panel A: major vs minor name changes

Major name change
−3 1.42 1.89* 0.45 1.76* 1.31 1.20 0.31 0.63 1.29 1.26 3.26 0.88
−2 1.43 1.86* 0.39 1.19 1.33 2.22** 0.40 1.56 1.30 1.72* 2.89 1.05
−1 1.39 1.63 0.33 1.24 1.32 1.65* 0.35 1.10 1.31 1.86* 3.14 1.40
0 1.41 1.75* 0.39 1.25 1.36 2.23** 0.42 1.65* 1.27 0.30 0.14 −1.65*
1 1.44 1.40 0.39 1.40 1.36 2.54** 0.53 2.29** 1.27 0.42 1.19 −1.43
2 1.40 1.30 0.31 0.56 1.36 2.39** 0.55 2.41** 1.27 0.65 0.37 −0.86
3 1.38 1.31 0.28 0.22 1.34 1.71* 0.41 1.19 1.28 1.11 0.67 −0.63
Minor name change
−3 1.25 1.64* 0.39 0.87 1.17 1.54 0.38 1.08 1.27 1.73* 0.40 1.46
−2 1.26 1.31 0.38 1.22 1.17 1.57 0.39 1.60 1.25 1.79* 0.33 0.95
−1 1.27 0.87 0.31 0.63 1.16 1.03 0.43 1.69* 1.26 1.71* 0.32 0.56
0 1.28 1.09 0.39 0.96 1.21 1.72* 0.39 1.94* 1.24 0.52 0.20 −0.37
1 1.28 1.25 0.34 0.88 1.20 1.78* 0.39 1.73* 1.23 −0.02 0.20 −0.23
2 1.28 1.83* 0.39 1.37 1.19 1.67* 0.32 0.80 1.25 1.80* 0.28 0.83
3 1.27 1.98** 0.45 1.15 1.21 2.08** 0.40 1.99** 1.22 0.87 0.18 0.01
Panel B: signal focused vs signal diversified strategy
Signal focused strategy
−3 1.37 1.50 0.35 0.96 1.24 1.25 0.27 0.56 1.25 1.07 0.24 0.56
−2 1.38 1.58 0.29 1.13 1.25 2.00** 0.33 1.43 1.26 1.72* 0.28 0.71
−1 1.38 1.14 0.24 0.60 1.25 1.49 0.31 1.15 1.27 2.03** 0.34 1.61
0 1.39 1.22 0.31 0.59 1.29 2.57** 0.43 2.51* 1.22 0.03 −0.03 −1.81*
1 1.40 0.95 0.28 0.84 1.27 1.76* 0.38 1.78* 1.23 −0.07 0.01 −2.04**
2 1.38 1.12 0.28 0.70 1.28 2.17** 0.39 1.60 1.23 0.30 0.08 −1.62
3 1.37 1.29 0.26 −0.03 1.26 1.43 0.31 1.03 1.22 0.39 0.07 −1.44
Signal diversified strategy
−3 1.32 2.22** 0.56 1.32 1.26 1.48 0.39 0.98 1.27 2.10** 0.41 1.41
−2 1.35 2.00** 0.60 1.34 1.27 1.92* 0.51 1.58 1.23 1.71* 0.37 1.20
−1 1.28 1.55 0.50 1.14 1.23 1.29 0.42 1.06 1.24 1.94* 0.30 0.41

(continued )
corporate
name changes

63
Market

for ten subsamples of

abnormal number of
reactions to

transactions ðATRt Þ
The average share
Table VI.

approval, and effec-

announcement,
their name around the

tive dates
companies changing
trading volume ratio
ðV OLRt Þ and average
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64
13,1
IJMF

Table VI.
Announcement date Approval date Effective date
Day V OLRt Rank test ATRt Rank test V OLRt Rank test ATRt Rank test V OLRt Rank test ATRt Rank test

0 1.32 1.99** 0.56 1.45 1.29 1.73* 0.43 1.28 1.23 0.61 0.24 −0.42
1 1.33 1.75* 0.50 1.14 1.32 3.09*** 0.65 2.58*** 1.21 0.28 0.15 −0.17
2 1.29 1.70* 0.47 1.07 1.27 1.93* 0.49 1.52* 1.24 2.10** 0.32 0.98
3 1.28 1.75* 0.48 0.98 1.30 2.38** 0.51 1.76 1.24 2.01** 0.33 0.85
Panel C: new ticker vs same ticker symbol
New ticker symbol
−3 1.38 1.58 0.35 1.06 1.28 0.78 0.23 0.23 1.28 1.37 0.31 0.99
−2 1.38 1.74* 0.29 0.65 1.30 2.17** 0.39 1.75* 1.29 2.10** 0.38 1.17
−1 1.34 1.37 0.24 0.82 1.30 1.59 0.33 1.08 1.30 2.13** 0.40 1.52
0 1.36 1.35 0.28 0.67 1.34 2.62*** 0.43 2.29** 1.26 0.27 −0.01 −1.65
1 1.40 1.14 0.31 0.97 1.34 2.65*** 0.50 2.68*** 1.27 0.42 0.06 −1.26
2 1.34 1.06 0.21 0.47 1.34 2.50** 0.51 2.57*** 1.27 0.97 0.17 −0.57
3 1.34 1.06 0.21 0.27 1.32 1.89* 0.41 1.71* 1.25 0.70 0.12 −1.13
Same ticker symbol
−3 1.31 2.02** 0.52 1.39 1.22 1.87* 0.42 1.46 1.27 1.41 0.31 0.93
−2 1.34 1.62 0.51 1.45 1.21 1.75* 0.40 1.65* 1.26 1.39 0.25 0.54
−1 1.34 1.32 0.44 0.98 1.18 1.03 0.36 1.36 1.28 1.57 0.25 0.05
0 1.35 1.78* 0.56 1.61 1.25 2.01** 0.44 1.91* 1.24 0.31 0.12 −0.92
1 1.34 1.65* 0.44 1.09 1.24 1.78* 0.40 1.40 1.23 −0.18 0.09 −0.81
2 1.35 1.83* 0.46 1.07 1.23 1.51 0.32 0.55 1.25 1.06 0.17 −0.22
3 1.32 2.16** 0.49 0.89 1.24 1.48 0.36 1.03 1.25 1.05 0.27 0.66
Panel D: structural vs pure name changes
Structural name change
−3 1.36 1.78* 0.38 1.14 1.23 1.43 0.34 1.18 1.23 1.20 0.35 1.32
−2 1.36 1.81* 0.41 1.15 1.27 2.44** 0.48 2.64*** 1.23 1.72* 0.34 1.09
−1 1.32 1.27 0.29 0.28 1.26 1.97** 0.39 1.83* 1.25 2.49** 0.40 1.75*
0 1.34 1.75* 0.40 1.27 1.29 2.38** 0.48 2.57*** 1.21 0.37 0.09 −1.06
1 1.35 1.30 0.32 0.91 1.29 2.84*** 0.53 2.79*** 1.20 0.05 0.07 −0.97
2 1.31 1.38 0.34 1.03 1.28 2.56** 0.49 2.29** 1.22 1.53 0.19 −0.06
3 1.31 1.10 0.29 0.12 1.28 2.10** 0.42 1.89* 1.21 1.69* 0.17 −0.29

(continued )
 Downloaded by University of Florida At 21:37 22 January 2017 (PT)

Announcement date Approval date Effective date

Day V OLRt Rank test ATRt Rank test V OLRt Rank test ATRt Rank test V OLRt Rank test ATRt Rank test

Pure name change

−3 1.34 1.78* 0.46 1.41 1.27 1.04 0.27 0.11 1.30 1.56 0.29 0.97
−2 1.37 1.46 0.35 0.97 1.26 1.60 0.30 0.75 1.30 1.67* 0.26 0.52
−1 1.36 1.05 0.37 1.14 1.23 0.56 0.29 0.51 1.31 1.12 0.27 0.02
0 1.38 1.19 0.41 0.83 1.30 1.88* 0.39 1.60 1.28 0.23 0.03 −1.52
1 1.40 1.22 0.42 1.11 1.30 1.26 0.38 1.24 1.29 0.23 0.10 −1.39
2 1.39 1.33 0.37 0.61 1.29 1.28 0.38 1.08 1.28 0.66 0.17 −0.64
3 1.36 1.90* 0.35 0.73 1.29 1.09 0.35 0.88 1.27 0.17 0.18 −0.50
Panel E: brand adoption vs radical name changes
Brand adoption name change
−3 1.81 1.04 2.14 1.70* 1.73 1.27 0.61 0.62 1.72 1.31 0.71 0.85
−2 1.85 0.98 2.14 1.36 1.68 0.67 0.56 0.49 1.77 0.75 0.73 0.67
−1 1.86 1.55 1.93 1.29 1.65 1.12 0.65 0.78 1.79 1.37 0.85 1.00
0 1.85 1.53 2.40 1.21 1.76 2.17** 0.63 1.11 1.69 0.56 0.27 −0.46
1 1.88 0.83 1.21 1.11 1.80 1.77* 0.79 1.26 1.70 0.10 0.36 −0.08
2 1.90 1.42 1.21 0.42 1.78 1.16 0.87 1.37 1.65 0.59 0.41 −0.26
3 1.77 1.20 2.14 1.43 1.67 0.33 0.45 0.00 1.67 0.58 0.48 0.23
Radical name change
−3 1.37 2.01** 0.41 1.35 1.25 1.35 0.32 0.78 1.23 1.29 0.22 0.55
−2 1.39 1.94* 0.38 1.07 1.29 2.59*** 0.40 1.57 1.23 1.89* 0.28 1.06
−1 1.33 1.30 0.28 0.69 1.27 1.62 0.33 1.16 1.24 1.74* 0.31 1.45
0 1.35 1.52 0.33 0.73 1.30 2.16** 0.41 1.61 1.20 0.02 −0.04 −2.12**
1 1.39 1.41 0.34 1.03 1.31 2.65*** 0.55 2.44** 1.21 0.21 −0.04 −2.17**
2 1.33 1.25 0.30 0.67 1.30 2.57*** 0.56 2.54** 1.22 0.57 0.10 −0.87
3 1.33 1.18 0.22 −0.17 1.30 2.02** 0.43 1.38 1.22 1.14 0.10 −0.92
Notes: The share trading volume and number of transactions are computed for TSX-listed companies that change their corporate name in the period from January 1997
to December 2011. *,**,***Statistical significance at the 10, 5, and 1 percent levels, respectively, using a two-tail test
corporate
name changes

65
Market
reactions to

Table VI.
 IJMF around the approval date. For major name changes, this abnormal share trading starts
13,1 two days before the approval date and lasts for several days. The abnormal number of
transactions becomes significant on the approval date and remains significant for two days.
Similarly, Panel B shows that name changes that signal company strategy are associated
with significant increases in both share volume and the number of transactions around the
approval date. Although, share volume suggests significant increases in trading volume on
66 some days around the announcement and effective dates, the number of transactions does
not changes significantly on those days.
As shown in Panel C, name changes accompanied with a new ticker symbol experience
significant increases in both share volume and the number of transactions on the approval
date and over the next three days. On other hand, name changes that keep the same ticker
symbol show a significant increase in both share trading volume and the number of
transactions only on the approval date.
Panel D presents the most drastic difference in trading activity changes between two
subsamples. Specifically, structural name changes exhibit significant increases in both
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share volume and the number of transactions starting from two days prior to the approval
date and lasting for the next five days. In addition, structural name changes show a
significant increase in trading volume on one day prior to the effective date. In contrast, pure
name changes do not seem to experience significant changes in trading volume around the
event dates.
Finally, Panel E shows that brand adoption name changes are not associated with a
significant change in trading activity. On the other hand, radical name changes are
accompanied with a significant increase in both trading volume and the number of
transactions after the approval date.
Taken together, corporate name changes are associated not only with significant
changes in abnormal returns, but also with significant changes in trading activity. However,
unlike abnormal returns, trading activity increases significantly around the approval date,
not the effective date. In addition, similarly to abnormal returns, the type of a name change
makes a significant difference. Among ten subsamples, major name changes, name changes
accompanied with a new ticker, structural name changes, and radical name changes show
the most pronounced increases in trading activity around the approval date.

6. Long-term abnormal returns

In this section, we examine long-term abnormal returns following the adoption of a new
corporate name. Previous studies of long-run effects of corporate name changes tend to find
negative or insignificant long-term wealth effects. Namely, Mase (2009) reports that UK
companies that change their names experience a significant decline in value over a three-year
period. Similarly, Göttner and Limbach (2011) find significant negative abnormal returns for
German firms for six and 12 months following the month of a corporate name change
announcement. In contrast, Kot (2011) documents only marginal significance for two out of
four types of name change over a three-year period following a new name adoption date for
Hong Kong listed firms. Although Wu (2010) finds some evidence of negative long-term
abnormal returns for US firms, the observed results are sensitive to the test methodology.
To analyze long-term abnormal returns for TSX-listed firms, we compute buy-and-hold
abnormal returns (BHARs):

" # " #
Y
T2
  h ðT 2 T 1 þ 1Þ i Y
T2
 
BH ARj;T 1 ;T 2 ¼ 1 þRj;t 1  1 þ a^ j ^
1 bj 1þRm;t 1 (12)
t¼T 1 t¼T 1
 where Rj,t and Rm,t are the daily stock and market returns on day t, respectively, and a^ j Market
and b^ j are the parameters of the market model for firm j estimated by the market model reactions to
over the estimation period that runs from −200 to −31 trading days before the effective corporate
date. The CFMRC value-weighted index is used as a proxy for the market return. T1 is one
day before the effective date, and T2 takes values 250, 500, and 750 trading days. name changes
The t-statistic is computed by using the skewness corrected transformed normal test
suggested by Hall (1992). 67
Table VII summarizes BHARs for the total sample and five pairs of subsamples for one-,
two-, and three-year periods starting one day before the effective date. Similar to previous
studies of long-term effects of corporate name changes, TSX-listed firms seem to experience
negative long-term abnormal returns. For the total sample, the median abnormal returns
are – 33.66 percent, – 60.95 percent, and – 70.56 percent for one-, two-, and three-year
periods, respectively. All subsamples show decline in value as well. However, for the total
sample and subsamples, only the sign test statistic is significant among three test statistics.
Thus, although a significant number of firms experience negative long-term abnormal
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returns over one-, two-, and three-year periods following a corporate name change, these
abnormal returns are not statistically significant under the t-test and rank test.

7. Conclusions
The examination of stock price and trading activities around corporate name changes of
companies listed on the TSX offers several key conclusions. First, stocks experience a
significant positive abnormal return around the effective date of a corporate name change.
Most importantly, the type of a name change matters. Specifically, major name changes are
associated with a much larger stock price gain than minor name changes. Name changes
that signal a shift to a focused strategy produce significant positive abnormal returns, but
name changes that communicate a diversified strategy do not. We also find a significant
positive stock price reaction for name changes accompanied with a ticker change, but not for
name changes without a ticker change. In contrast to pure name changes, structural name
changes, which are associated with major corporate actions, such as a merger, acquisition,
or product launch, experience significant stock price gains around the effective date.

One year (−1; 250) Two years (−1; 500) Three years (−1; 750)
Median Median Median
BHARs Rank BHARs Rank BHARs Rank
Sample (%) t-test Sign test test (%) t-test Sign test test (%) t-test Sign test test

Total −33.66 −1.48 −4.40*** −0.49 −60.95 −1.36 −5.25*** −1.04 −70.56 −1.36 −5.68*** −1.17
Major −53.04 −1.41 −3.37*** −0.40 −78.88 −1.36 −4.37*** −1.07 −114.63 −1.36 −4.95*** −1.00
Minor −20.77 −1.67* −2.84*** −0.28 −41.43 −1.39 −3.00*** −0.41 −58.67 −1.36 −3.00*** −0.69
Focused −38.19 −2.66*** −3.20*** −0.42 −65.29 −2.25** −3.62*** −0.67 −70.72 −1.61 −4.73*** −0.76
Diversified −28.35 −1.43 −2.99*** 0.16 −55.48 −1.36 −3.37*** −0.36 −67.78 −1.36 −2.99*** −0.68
New ticker −42.01 −1.40 −3.52*** −0.87 −65.62 −1.36 −3.22*** −0.97 −104.91 −1.36 −3.66*** −0.63
Same ticker −22.06 −1.88* −2.69*** 0.18 −58.09 −1.40 −4.23*** −0.52 −64.46 −1.36 −4.39*** −1.07
Structural −44.20 −1.46 −4.34*** −0.56 −66.07 −1.36 −3.47*** −0.99 −78.76 −1.36 −3.90*** −0.49
Pure −32.41 −2.56** −1.85* −0.15 −57.19 −1.44 −3.89*** −0.49 −66.25 −1.40 −4.20*** −1.29
Table VII.
Brand −23.08 −1.67* −0.85 0.44 −66.13 −1.39 −2.32** −0.21 −74.05 −1.38 −1.58 −0.30
Median buy-and-hold-
Radical −55.62 −1.40 −3.05*** −0.64 −83.81 −1.36 −3.85*** −1.19 −112.88 −1.36 −4.65*** −1.16
abnormal returns
(BHARs) for the total
Notes: The buy-and-hold-abnormal returns are computed for TSX-listed companies that change their corporate name in sample and ten
the period from January 1997 to December 2011. Day 0 is the effective date of a corporate name change. The CFMRC subsamples following
value-weighted index is used as a proxy for the market return. The t-statistic is computed by using the skewness corrected the effective
transformed normal test (Hall, 1992). *,**,***Statistical significance at the 10, 5, and 1 percent levels, respectively, using a date of a corporate
two-tail test name change
 IJMF Finally, corporate name changes are also accompanied with significant increases in trading
13,1 volume for several days starting from the approval date. Among different subsamples,
major name changes, name changes accompanied with a ticker change, and structural name
changes show the largest increases in trading volume.

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Corresponding author
Ernest N. Biktimirov can be contacted at: ebiktimirov@brocku.ca
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