Market reactions to corporate name changes: evidence from the Toronto Stock Exchange
International Journal of Managerial Finance
Article publication date: 6 February 2017
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.
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.
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.
The limitation of this study comes from the difficulty to precisely identify the date when the market learns about a possible corporate name change.
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.
Biktimirov, E.N. and Durrani, F. (2017), "Market reactions to corporate name changes: evidence from the Toronto Stock Exchange", International Journal of Managerial Finance, Vol. 13 No. 1, pp. 50-69. https://doi.org/10.1108/IJMF-08-2015-0154
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