Stock Name Changes and Abnormal Returns:An empirical study of the Chinese stock market

Abstract

Recently, in the Chinese stock market, changing stock names has become a popular investment trend. Some Chinese listed companies change their stock names in attempt to increase company’s value. In order to find the correlation between stock name changes and abnormal returns, we select 97 listed companies in both Shanghai and Shenzhen Stock Exchanges from 2011 to 2014 and sort the companies according to the reasons of stock name changes. Name changes are classified into five categories according to motivations: subjective wills, future development, main business changes, asset reorganization and other reasons. The first two categories are defined as subjective reasons and others are objective reasons. We test the significance of average and cumulative average abnormal returns by using market adjusted model. We find that there are abnormal returns and overreactions in the Chinese stock market. Regression analyses are made to examine the different impact on cumulative abnormal returns for subjective reasons and objective reasons. We observe that no dummy variable is significant, which means that subjective reasons and objective reasons do not have significantly different impact on cumulative abnormal returns.