Journal of Business Research 68 (2015) 281290

Contents lists available at ScienceDirect

Journal of Business Research

The name's the game: Does marketing impact the value of corporate
name changes?
Saim Kashmiri a,1, Vijay Mahajan b,2
a
b

School of Business Administration, University of Mississippi, University, MS 38677, United States

Department of Marketing, McCombs School of Business, University of Texas at Austin, 1 University Station, B6700, Austin, TX 78712, United States

a r t i c l e

i n f o

Article history:
Received 13 December 2012
Received in revised form 13 July 2014
Accepted 14 July 2014
Available online 30 July 2014
Keywords:
Corporate naming
Branding
Advertising
Marketing capability
Chief marketing ofcer
Shareholder value

a b s t r a c t
Each year, thousands of rms change their names, many in the absence of an accompanying M&A event. Existing
research reveals signicant heterogeneity in the stock market response to such pure name changes. Why do
some rms reap greater stock market rewards for changing their names? Our study of name change announcements by 180 publicly listed U.S. rms reveals that marketing-related factors play a critical role in the value of
corporate name changes: Firms with high marketing inuence in their C-suite, high marketing investments,
and high marketing capability receive greater stock market rewards for changing their names. Firms that change
their names to leverage a strong brand in their portfolio, or to proactively communicate a change in their scope of
business (i.e., a future change in their product portfolio or geographical markets), are also rewarded more than
rms that change their names to retroactively align their names with a new scope.
2014 Elsevier Inc. All rights reserved.

1. Introduction
Each year, thousands of rms across the globe change their names
(Standard & Poor's Capital IQ database), many in the absence of an accompanying merger and acquisition (M&A) event. Prior scholars
(e.g., Wu, 2010) have classied name changes unrelated to M&As
the type of changes we focus on in this article as pure name changes.
Examples include RIM's name change to Blackberry, Apple Computer
Inc.'s name change to Apple Inc., and Federated Department Stores
Inc.'s name change to Macy's Inc.
A rm's name change is a major strategic action that usually comes
with signicant tangible costs associated with communicating the
change to various stakeholders, and intangible costs associated with
loss of the existing name. One wonders whether the benets of these
changes actually justify their costs. Surprisingly, some researchers
(e.g., DeFanti & Busch, 2011) nd a positive, some (e.g., Karbhari &
Sori, 2004) highlight a negative, and others (e.g., Bosch & Hirschey,
1989) report no association between corporate name changes and
shareholder value. Research that sheds light on these inconclusive results and explores the boundary conditions under which name changes
increase shareholder value is limited on at least two fronts.
First, little work has gone into understanding whether certain types
of name changes are rewarded differently than others, and if so, what
E-mail addresses: skashmiri@bus.olemiss.edu (S. Kashmiri),
vijay.mahajan@mccombs.utexas.edu (V. Mahajan).
1
Tel.: +1 662 915 1523.
2
Tel.: +1 512 471 0840.

http://dx.doi.org/10.1016/j.jbusres.2014.07.007
0148-2963/ 2014 Elsevier Inc. All rights reserved.

explains these differential rewards. Second, existing research on corporate name changes (e.g., Bosch & Hirschey, 1989; Cooper, Dimitrov, &
Rau, 2001; Howe, 1982; Karpoff & Rankine, 1994; Kot, 2011), focuses
mostly on nance-related contextual variables such as prior rm performance and rms' classication as nancial or non-nancial institutions.
Notable for their omission are studies exploring the role of marketingrelated factors in the value of corporate name changes. This omission
is highly surprising, given that understanding whether the existing
name has lost its appeal with customers, selecting a name consistent
with the intended rm image, and communicating a name change all
require signicant marketing expertise.
We address these limitations by conducting an event study of pure
name change announcements by 180 publicly listed U.S. rms. We
rst classify different types of name changes, and explain why we expect the stock market to react less positively to one particular kind.
We then explore the impact of three marketing variables on the valuation of name changes.

2. Theory
2.1. Common types of pure name changes
Content analysis of the press releases accompanying name changes
unrelated to M&As helps reveal two common motivations for pure
name changes: (1) Leveraging a strong existing brand in the portfolio,
and (2) communicating a change in the scope of business (i.e., a change
in the rm's product portfolio or geographical markets).

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S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

Federated Department Stores' adoption of the Macy's name, can be

classied as an example of a rm leveraging a strong brand in its
portfolio:
By aligning our corporate name with our largest brand [Macy's], we
will increase the visibility of the company with customers, leverage
the world-famous Macy's brand name, and get more credit for our accomplishments in the marketplace. (CEO Terry J. Lundgren)
In the case of Chinadotcom changing its name to CDC, however, the
rm, as revealed in its press release, intended to communicate a change
in its scope of business a change involving greater product and geographical diversication:
The new name, without dotcom signals the shift of our business focus
away from a heavy reliance on the Internet sector. In addition, the new
name without the clear reference of china symbolizes the company's
more geographically diversied revenue and customer mix.
Similarly, the motivation behind Immtech Inc.'s name change to
Immtech Pharmaceuticals, as revealed by the company's press release,
was to communicate a new business scope that involved the launch of
the rm's rst oral drug and an entry into the pharmaceuticals market:
This name change signies the start of a new era for our company as
we move our rst oral drug candidate toward commercial launch
and marketing. (CEO and Chairman Eric L. Sorkin)
We broadly consider Chinadotcom and Immtech Inc.'s name
changes as examples of rms communicating a change in their scope
of business. However, we use another factor to subclassify this latter
category of name changes even further: the timing of the name change.
When changing its name to communicate a new scope, a rm may
change its name either proactively, whereby it changes its name
prior to initiating changes in its business scope, or retroactively,
whereby it changes its name after initiating a transition in its business scope. Immtech Inc.'s name change to Immtech Pharmaceuticals can be classied as a proactive name change, as the name
change announcement preceded Immtech's entry into the pharmaceuticals market. Chinadotcom's name change to CDC, on the other
hand, can be classied as a retroactive name change. The word diversied used in the past tense in the press release ( the new name
symbolizes the company's more geographically diversied revenue
and customer mix) reveals that the company had already diversied beyond the Internet product and the Chinese market at the
time it decided to adopt the CDC name.
Given these three classications of name changes, then, one wonders whether some types of name changes are likely to reap greater
stock market rewards than others.

2.2. Investigating the nancial valuation of different types of name changes

Prior researchers (e.g., Horsky & Swyngedouw, 1987; Karpoff &
Rankine, 1994) have highlighted two mechanisms by which name
changes help rms: (1) inherent value and (2) signaling value. Inherent
value involves the new name itself increasing the rm's cash ows by
improving customer awareness or perception of the rm. Signaling
value, on the other hand, involves the rm's act of changing its name
providing a promise to investors that the company is likely to make
value-generating changes in its business operations.
A rm that adopts the name of a strong brand in its portfolio is expected to benet from both inherent and signaling value. By making
its link with a prominent brand more explicit, a rm is likely to increase
customer awareness of the rm and improve customer perception of its
other brands. Furthermore, investors are likely to be reassured that a

rm's top executives are unlikely to risk diluting the adopted brand
without being condent about their rm's future prospects.
A rm that changes its name to communicate a new scope (whether
retroactively or proactively), assuming the new name is appropriate, is
also expected to gain inherent value by changing its perception in customers' eyes. For example, Chinadotcom's name change to CDC is expected to help change customer perception of the rm to a more
globalized one, thereby attracting new customers from outside China.
Similarly, Immtech Inc.'s name change to Immtech Pharmaceuticals is
likely to help attract customers who may otherwise not have been
aware of the company's entry into the pharmaceuticals market.
With regard to signaling value, when a rm proactively changes
its name to communicate a forthcoming change in scope, the name
change helps communicate relatively unexpected news to investors.
The efcient market hypothesis would then dictate that investors
would update their expectations of the rm's future cash ows, and
the expected value of the new strategy would be incorporated into
the rm's stock price quickly. However, when a rm retroactively
changes its name, investors are expected to have already tracked the
rm's gradual transition in scope. Most of the value of the new scope
would then have already been incorporated into the rm's stock price.
Any limited value that the name change announcement provides
would then be reective primarily of inherent value and the limited
additional condence to investors about the potential of the rm's
new scope. Thus:
H1. Relative to a rm that changes its name to retroactively align its
name with a new scope of business, a rm is likely to be rewarded
more by the stock market if it changes its name (a) to leverage a
strong brand in its portfolio or (b) to proactively communicate a
new business scope.

2.3. Investigating the role of marketing in the nancial valuation of name

changes
We believe three marketing factors help answer some important
questions investors may have while evaluating a name change
announcement: (a) Does the choice of the new name, and the strategic
shift that the name change may communicate, make sense from a customer perspective? (b) Is the rm likely to make sufcient marketing
investments while implementing the name change process? (c) Does
the rm have the capability to use its marketing resources efciently
while changing its name?

2.3.1. Investigating the role of marketing's inuence in the C-suite

Investors are likely to be uncertain about the inherent value of a
new name because names that are adopted whether to leverage an
existing brand or to reect a changed scope differ signicantly in
regard to such intrinsic features as memorability, meaningfulness,
aesthetic appeal, transferability, adaptability, and associations
(Yorkston & Menon, 2004); differences in such name characteristics
are in turn related to differences in customer perception of a rm.
Thus investors may be uncertain whether a new name is in line
with the intended rm image, and whether it will succeed in changing customers' perception of the rm to a more globalized or more
diversied rm.
Similarly, investors are expected to have at least some uncertainty
about the value-generating potential of a change in scope that the
new name may foreshadow. This uncertainty occurs because, while
venturing into new product segments or geographical markets may
help rms stimulate growth (Campa & Kedia, 2002), changes in scope
may also hurt rms by making them move away from their core competencies (Denis, Denis, & Sarin, 1997). Furthermore, investors may be uncertain about the TMT's ability to effectively manage the strategic

S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

actions accompanying a change in scope such as forming new marketing alliances and channel partnerships.
How, then, do investors diminish their uncertainty? Upper echelon theory suggests that a rm's strategic decisions are a reection of
the attributes of TMT members (Hambrick & Mason, 1984). Thus,
when investors are uncertain about the value of a rm's strategic decision, they examine characteristics of the rm's TMT to help diminish their uncertainty. For example, studies have found that such
characteristics of the TMT as education and political experience
(Higgins & Gulati, 2006), provide signals of rm quality, which in
turn inuence the stock market's valuation of an IPO.
In the context of name changes, we expect the level of marketing inuence in the TMT to be an important TMT characteristic inuencing
name change valuation. Firms where marketing holds a seat of inuence in the TMT pay greater attention to customers' voice (Kerin,
2005), are more likely to generate and consider consumer insights
while formulating strategic options (Gilliatt & Cuming, 1986; Kerin,
2005), and are more likely to adopt the marketing concept in their strategic decisions (Crosby & Johnson, 2005). Such rms are likely to reassure investors that the TMT has selected an appropriate name after
carefully analyzing the impact of the new name on customer awareness
and perception.
Similarly, strong marketing inuence in a rm's C-suite, is likely
to reassure investors that the TMT made the decision to change the
rm's scope after closely analyzing the rms' core competencies
and market conditions, and that the TMT has the necessary functional expertise to effectively carry out the strategic marketing actions
accompanying a change in scope: form new marketing alliances,
manage channel relationships, support existing and new customers,
and form strategic partnerships with new suppliers. Increased investor condence, is in turn expected to increase the name's signaling
value. Thus:
H2. Firms that change their names are likely to be rewarded more by
the stock market if marketing has a high inuence in their top management team.
2.3.2. Investigating the role of marketing investments: advertising intensity
We also expect rms' advertising intensity to signicantly impact
the value of their name changes by affecting both the signaling and inherent value components of these changes.
For the rm to gain from the inherent value of adopting an
existing brand, it is important that the rm have a strong brand to
adopt. As researchers have found, advertising is a key investment
that goes toward building strong brands (e.g., Mela, Gupta, &
Lehmann, 1997). Hence, relative to a rm with low advertising intensity, it is more likely that a rm advertising heavily has a strong
brand it can leverage. Similarly, rms with greater advertising intensity are also expected to advertise their new name more heavily,
leading to a greater awareness among customers of the rm's new
scope such as its increased diversication or globalization. With
greater customer awareness of the new name, the inherent value of
the name change via a change in customer perceptions is also likely
to increase.
Similarly, signaling literature (e.g., Kirmani & Rao, 2000) reveals that
a key characteristic of an effective signal is its observability, or the extent
to which outsiders are able to notice the signal. Name changes of rms
with high advertising intensities are likely to be more observable and
therefore likely to be more effective signals: Prior research shows that
advertising increases a rm's salience with individual investors, and
that investors are more familiar with strategic actions taken by rms
that have higher advertising intensities (e.g., Grullon, Kanatas, &
Weston, 2004). Thus:
H3. Firms that change their names are likely to be rewarded more by
the stock market if they have high advertising intensity.

283

2.3.3. Investigating the role of marketing capability: marketing efciency

Firms with higher marketing capability are more likely to develop, support, and maintain strong brands (Morgan, Slotegraaf,
& Vorhies, 2009), one of which (e.g., Macy's or Blackberry) may
be adopted as a rm name to increase awareness and improve
perception of the rm in customers' eyes. This is because the efcient utilization of marketing resources such as advertising is
critical to building strong brands (Mela et al., 1997). Furthermore, rms with higher marketing capability are expected to create greater awareness of their new name with the same level of
marketing investment, thus increasing the inherent value of
their new name.
With regard to signaling value, besides the observability of a signal, another key characteristic of an effective signal is its differential
cost (e.g., Connelly, Hoskisson, Tihanyi, & Certo, 2011; Kirmani &
Rao, 2000). If all signal senders incur the same cost associated with
sending the signal, low-quality rms have incentives to cheat. Receivers learn to ignore such signals, making them ineffective
(Connelly et al., 2011). In the context of a corporate name change
signal, a key characteristic that separates a high-quality rm (i.e., a
rm whose new scope or strategic direction has relatively high
value potential) from a low-quality one is the rm's marketing capability. This situation happens because rms with higher marketing
capability are more efcient in developing and implementing marketing actions to support their new strategic direction. For example,
if a rm's new direction involves increased product diversication,
rms with higher marketing capability are expected to outperform
rms with lower marketing capability in creating awareness of
their new products and managing the health of their overall brand
portfolio. Thus:
H4. Firms that change their names are likely to be rewarded more by
the stock market if they have high marketing capability.

3. Methodology
3.1. Sample
To develop our sample, we rst used S&P's Capital IQ database to
identify name change events in the years 20022007 for all public
U.S. rms listed on the NYSE, AMEX, or NASDAQ stock exchanges.
The time frame we chose (20022007) was large enough to ensure
that our results did not reect peculiarities of a particular year and
also helped us avoid the turbulent recessionary stock market periods
in the years 2001 and 2008. Next, any name change announcement
that coincided with other major announcements such as dividends
payout, changes of CEOs, or mergers and acquisitions (M&As) within
ten days of the name change were excluded from the sample
(e.g., Geyskens, Gielens, & Dekimpe, 2002). Additionally, as our research focused on three types of pure name changes discussed earlier, we restricted our sample to name changes belonging to one of
these types. Our nal sample was comprised of 180 name changes.
Each of the 180 rms in our sample changed its name once between
2002 and 2007.

3.2. Event study methodology

We used an event study (Boyd, Chandy, & Cunha, 2010; Mathur &
Mathur, 2000) to calculate the abnormal return for rms surrounding
their name change announcements. We employed the Carhart 4 factor
model (used by Barth, Clement, Foster, & Kasznik, 1998; Madden,
Fehle, & Fournier, 2006, among others), and market model (used by
Boyd et al., 2010; Mathur & Mathur, 2000, among others) in our
analysis.

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S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

Carhart (1997) 4 factor model:


Ri;t i Rrf;t i Rm;t Rrf;t si SMBt hi HMLt ui UMDt i;t
1

corporate branding may send stronger signals when changing names,

and therefore experience superior shareholder value. Prior rm performance and Firm size were included as continuous control variables
while the remaining control variables were included as binary dummy
variables.

Market model:
3.4. Data measures and sources
Ri;t i i Rm;t i;t

For both models, Ri,t denotes the rate of return on the stock price of
rm i on day t; Rm,t denotes the average rate of return on a benchmark
portfolio of market assets over an estimation period preceding the
event, i is the intercept, and i,t is the residual of the estimation (assumed to be distributed i.i.d. normal). We report results based on an estimation sample covering 301 to 46 trading days before a name change
announcement. In the Carhart model, Rrf,t denotes the risk-free rate of
return in period t; SMBt, HMLt, and UMDt denote the size factor, value
factor, and momentum factor, respectively. For both models, we estimated abnormal returns (AR) for each announcing rm by taking the
difference between the observed rate of return Ri,t and the expected
rate of return E(Ri,t), i.e., AR = i,t = Ri,t E(Ri,t). We also calculated cumulative abnormal return (CAR) for each rm i to account for information leakage:
CARi t1 ; t2 

t2
X

i;t

tt1

Here, t = 0 on the day of the name change announcement. Finally,

because we were also interested in analyzing whether the abnormal
returns were different for different subsamples of rms (e.g., rms
that had a CMO present in their TMT vs. those that did not), we averaged
this CAR into a cumulative average abnormal return (CAAR) for each
subsample.
To test if the CAARs for our subsamples were signicantly different
from zero, we used both the CDA test (Brown & Warner, 1985), and
the Generalized sign Z test (Cowan, 1992). As CAARs depend on the
event window chosen, we considered different windows.
3.3. Regression model
We regressed CARs of each name change event on our proposed
explanatory variables:
CARi t1 ; t2  b0 b1  Leveraging strong brandi b2
Proactively communicating new scopei b3

3.4.1. Independent variables

We measured advertising intensity using COMPUSTAT as the ratio of
advertising expenditure to total assets in the year preceding the year in
which the rm changed its name. Following Dutta, Narasimhan, and
Rajiv (1999), we measured marketing capability by modeling a rm's
activities as an efcient frontier relating the marketing resources used
by a rm (i.e., advertising, SG&A expenditures, investments in customer
relationships, etc.) to the optimal attainment of its objectives
(i.e., sales). We provide parameter estimates of our marketing capability
model in Appendix A. We operationalized marketing's inuence in the
TMT using a dummy variable that took the value of 1 when a CMO
was present in the rm's TMT. A rm was considered to have a CMO
in its TMT if it had an executive ofcer with the term marketing in
his or her title or if the description of the role given in the 10-Ks indicated that the concerned executive ofcer was primarily responsible for
marketing (Kashmiri & Mahajan, 2010; Nath & Mahajan, 2008). A
graduate research assistant and one of the researchers independently
analyzed rms' press releases accompanying their name change announcements to code, using dummy variables, for the type of name
change. The raters agreed on the type of name change for 164 of the
180 name changes (91.1% agreement). After discussion, the cases of disagreement were resolved.
3.4.2. Control variables
We coded a name change as major if the new name did not include
a recognizable portion of the old name. We categorized rms with 2digit SIC codes 6064 as nancial institutions. We analyzed rms'
websites, 10-Ks, and Hoovers database to code whether a rm had durable products in its portfolio. We analyzed the rms' 10-Ks, and observed their 4-digit primary SIC codes to classify them as B2C or B2B.
Following Horsky and Swyngedouw (1987), we measured the Prior
performance of each rm as the rm's cumulative abnormal returns
in its trading period ( 190, 43), reecting the rm's performance
relative to the market in the 21-week pre-event period. A rm was classied as using corporate branding if it used its rm name to brand its
products, while rm size was measured as the natural logarithm of
the rm's total assets.

Marketing influence in TMTi b4

Marketing investmenti b5  Marketing Capabilityi
b612  controlsi

4
We controlled for major name changes (i.e., changes where the new
name was radically different from the original name), as such changes
being more visible may have higher abnormal stock returns (Horsky &
Swyngedouw, 1987). We controlled for the rm being a nancial institution, as customer trust may be more crucial to nancial institutions
relative to other types of rms (Horsky & Swyngedouw, 1987). We controlled for rms' presence in the durable goods category and the rms
being B2B rms, because a corporate name may be more inuential in
driving sales of durable goods, and the sales of B2B rms (Horsky &
Swyngedouw, 1987; Sethuraman & Tellis, 1991). We controlled for
rms' prior performance, because a poorly performing rm may be
more likely to improve its performance after changing its name. Firm
size was controlled, as larger rms may experience smaller abnormal
returns. Corporate branding was also controlled, given that rms with

3.5. Results
As shown in Table 1, the mean abnormal stock return on the day of
the event, though positive and signicant by the CDA test, was only
marginally signicant according to the Generalized Z test. Moreover, 8
of the 11 mean daily abnormal stocks were non-signicant, according
to both their CDA test scores and their Generalized Z test scores. To
the extent that the mean abnormal returns were non-signicant in
the days 5 to 1, we did not nd evidence of information leakage
prior to the event. All in all, we concluded that rms that changed
their corporate names experienced a marginal increase in their value.
In a separate analysis, we calculated a one-year buy-and-hold return
(BHR) for our sample rms starting from their name change announcement date, and found this one-year BHR to be statistically the same as
that of a control portfolio of rms matched by size and industry
(Barber & Lyon, 1997). While this investigation suggests only a shortterm market impact of name changes, other rm actions during the
course of one year may have diluted name changes' long-term impact.
We therefore consider the question of if and when a name change

S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

285

Table 1
Mean daily abnormal return for sample.
Carhart 4 factor model

Market model

Day

Mean abnormal return

CDA t

Generalized Z

% positive

Day

Mean abnormal return

CDA t

Generalized Z

% positive

5
4
3
2
1
0
1
2
3
4
5

.20%
.35%
.02%
.02%
.01%
1.11%
.07%
.34%
.08%
.52%
.63%

.613
1.052
.059
.060
.030
3.343***
.214
1.015
.238
1.562
1.895*

.390
.508
.508
.430
.471
1.631
.358
.807
1.257
1.588
1.438

46
49
49
49
44
53
49
50
52
41
42

5
4
3
2
1
0
1
2
3
4
5

.12%
.24%
.01%
.14%
.04%
1.07%
.08%
.35%
.02%
.45%
.51%

.346
.695
.037
.421
.112
3.163***
.232
1.019
.064
1.317
1.496

.240
.508
1.407
.130
.320
1.482
.508
.958
.958
1.588
1.138

46
49
53
47
46
53
49
51
51
41
43

Note: p b .10, *p b .05, **p b .01, and ***p b .001, one-tailed. N = 180.

increases long-term market value as an interesting question that deserves further exploration.
Next, as shown in Table 2, we carried out some preliminary univariate analysis.
We found CAAR to be positive and signicant when the type of
name change was leveraging a strong brand, or when it was proactively
communicating a new scope, but found CAAR to be negative and significant for name changes retroactively communicating a new scope. We
also found CAAR to be positive and signicant for the subsample in
which the rm had a CMO in its TMT, but non-signicant otherwise.
These results were generally robust to different event windows, different abnormal return models (Carhart 4 factor or market model), and
different tests (CDA test or Generalized Z test). We concluded that

without controlling for other factors, a rm's motivation behind its

name change and the presence of a CMO in the rm's TMT both
impact investor reaction to the rm's name change announcement.
All in all, Table 2 provides preliminary evidence in support of H1a,
H1b, and H2.
To formally test all our hypotheses, we next conducted multivariate
regression analysis. Table 3 presents descriptive statistics and correlations for all common measures in our regression models, pooled over
the period of observation. None of the pair-wise correlations was greater than the benchmark of .50. For all models discussed, the variance ination factors were much less than the benchmark of 10. These tests
suggest that there were no signicant multicollinearity problems
(Kennedy, 2003).

Table 2
Cumulative average abnormal returns for complete sample and sample split according to different factors.
Carhart 4 factor model
Event period

Market model

CAAR

CDA t

% positive

Event period

Generalized Z

% positive

(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)

1.17%
.20%
.11%
.06%
.91%

3.529***
.353
.118
.065
.182

1.557
.765
.407
.048
.407

53
50
49
47
49

(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)

1.07%
1.03%
1.11%
1.31%
.00%

3.163***
2.145*
1.886*
1.729*
.004

1.482
1.107
1.556
.359
.359

53
51
53
49
49

Sample split according to type of name change

Leveraging brand
(0)
[N =67]
(1,0)
(1,+1)
(2,+2)
(5,+5)
(0)
Proactively communicating
(1,0)
new scope
(1,+1)
[N = 34]
(2,+2)
(5,+5)
(0)
Retroactively communicating
new scope
(1,0)
[N = 79]
(1,+1)
(2,+2)
(5,+5)

2.98%
3.59%
2.70%
4.22%
.37%
2.29%
2.03%
3.61%
3.40%
4.63%
.87%
1.33%
1.27%
1.57%
3.07%

4.777***
4.070***
2.499**
3.024**
.181
3.137***
1.965*
2.856**
2.085*
1.911*
2.135*
2.313*
1.805*
1.730*
2.282*

2.797**
3.391***
2.662**
2.662**
.718
3.110***
2.080*
3.110***
1.392
2.423**
2.339**
2.116*
2.561**
2.116*
1.449

64
69
64
64
52
74
65
74
59
68
35
37
34
37
41

(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)
(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)
(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)

2.83%
3.41%
2.88%
4.05%
1.08%
2.24%
1.84%
3.38%
3.32%
4.80%
.88%
1.33%
1.35%
1.76%
2.97%

4.501***
3.845***
2.644**
2.886**
.520
3.088**
1.794*
2.688**
2.045*
1.994*
2.119*
2.257*
1.875*
1.900*
2.154*

2.803**
3.159**
3.652**
2.666**
1.186
2.760**
2.073*
2.760**
1.729*
2.073*
2.307*
2.752**
2.974**
2.752**
2.084*

65
68
71
65
55
71
65
71
62
65
35
33
32
33
37

Sample split according to presence of CMO in the TMT

CMO present
(0)
2.45%
[N = 80]
(1,0)
3.02%
(1,+1)
3.40%
(2,+2)
4.21%
(5,+5)
1.61%
CMO not present
(0)
.01%
[N = 100]
(1,0)
.44%
(1,+1)
.61%
(2,+2)
.62%
(5,+5)
1.70%

5.082***
4.429***
4.061***
3.896***
1.006
.012
.728
.829
.655
1.202

3.171***
3.395***
2.947**
2.499**
2.051*
.666
.758
.758
1.161
.959

65
66
64
61
59
43
43
43
41
42

2.28%
2.79%
3.12%
3.91%
1.96%
.09%
.39%
.52%
.79%
1.59%

4.662***
4.040***
3.688**
3.586**
1.212
.206
.636
.682
.809
1.097

3.390**
3.390**
3.166**
2.270*
1.822*
1.066
1.559
.753
1.559
1.156

66
66
65
60
58
41
39
43
40
41

Total
[N = 180]

Note: p b .10, *p b .05, **p b .01, and ***p b .001, one-tailed.

Generalized Z

(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)
(0)
(1,0)
(1,+1)
(2,+2)
(5,+5)

CAAR

CDA t

286

S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

Table 3
Descriptive statistics and correlation coefcients.
Mean SD
1. Abnormal return (0)
.01
2. Leveraging brand
.37
3. Proactively communicating new scope
.19
4. Marketing inuence in TMT (CMO presence)
.44
5. Marketing investment (advertising intensity)
.03
6. Marketing capability (efciency)
.67
7. Major name change
.53
8. Financial institution
.19
9. Durables
.22
10. B2B
.63
11. Firm size (ln of total assets in $m)
6.03
12. Corporate branding
.41
13. Past performance
.01

.04
.49
.39
.50
.05
.28
.50
.03
.03
.49
2.29
.49
.08

.30
.16 .37
.30 .004
.27 .09
.16
.10
.19
.29
.04
.04
.03
.01
.11
.14
.17 .02
.25
.29
.07

.06

.24
.38
..001
.06
.05
.02
.04
.06
.12
.04

.004
.23
.05
.06
.07
.20 .10
.13
.04
.05
.01
.20
.01
.18 .05
.06 .04

10

11

12

.04
.50
.18
.20
.01
.08
.11

.06
.15 .25
.08
.30
.18
.25
.19 .05
.39
.001
.26 .06
.34
.26
.08
.04
.04
.06
.13 .07

Note: *p b .10, **p b .05, two-tailed. N = 180.

Table 4 summarizes the results of our regression analysis with abnormal return on day 0 serving as the dependent variable. As Table 4 reveals, our results remained robust to the choice of abnormal returns
model (i.e., Carhart 4 factor model in Model 1, and market model in
Model 2.)
We found coefcients of all focal independent variables signicant
and in the hypothesized direction. The coefcients of leveraging brand
(p b .01) and communicating new strategy proactively (p b .01) were
found to be positive and signicant, supporting H1a and H1b, respectively. Similarly, we found the coefcient of CMO presence to be positive
and signicant (p b .01), supporting the hypothesized role of marketing
inuence in the TMT (H2). The coefcient of advertising intensity was
positive and signicant (p b .01), supporting H3. Finally, the coefcient
of marketing capability was positive and signicant (p b .01 in Model 1
and p b .05 in Model 2), supporting H4. Amongst the control variables,
we found smaller rms and nancial institutions experiencing larger
abnormal returns. Furthermore, rms with a corporate branding strategy were found to experience larger abnormal returns, reecting the

Table 4
Result of OLS regression with abnormal return on day 0 as dependent variable.
Variables

Independent variables
Leveraging brand
Proactively communicating
new scope
Marketing inuence in TMT
(CMO presence)
Marketing investment
(advertising intensity)
Marketing capability (efciency)
Controls
Major name change
Financial institution
Durables
B2B
Firm size (ln of total assets in $m)
Corporate branding
Past performance
Intercept
2
R
Overall F-test

Coefcients
(t-values)

Coefcients
(t-values)

Model 1
(Carhart 4 factor)

Model 2
(market model)

.025(3.58)***
.024(2.87)***

.027(3.97)***
.021(2.57)***

.019(3.12)***

.017(2.93)***

.165(2.72)***

.161(2.75)***

.031(2.51)***

.024(2.06)**

3.1E4(.05)
.0182(2.04)**
6.4E3(.92)
5.0E3(.73)
4.3E3(2.92)***
.016(2.44)**
7.2E3(.21)
.015(.96)
35.7%
F(12,167) = 7.73***

.001(.23)
.0131(1.72)*
7.2E3(1.05)
5.7 E3(.86)
4.5E3(3.18)***
.015(2.44)**
6.7E3(.20)
6.3E3(.43)
35.6%
F(12,167) = 7.69***

Note: *p b .10, **p b .05, and ***p b .01, two-tailed. N = 180.

more effective signal that the name change of a rm with a corporate

branding strategy provides.
As shown in Appendices BD, we conducted a number of robustness checks, dealing with alternate estimation windows, alternate
event windows, and alternative measures of marketing inuence in
the TMT, with no signicant changes to our overall conclusions. We
also explored the predictive validity of a parsimonious model
(Appendix E) and found it to be in line with the predictive accuracy
of prior event study models.
4. Discussion and implications
4.1. Implications for theory
A recent research stream investigates the role that marketing investments such as advertising (e.g., McAlister, Srinivasan, & Kim,
2007; Srinivasan, Pauwels, Silva-Risso, & Hanssens, 2009), and marketing assets such as marketing capability (e.g., Dutta et al., 1999),
play in inuencing overall rm performance. Our results suggest
that advertising and marketing capability also play a critical role in
impacting the stock market response to corporate name changes.
We therefore highlight the importance of exploring rm-specic
conditions that increase or decrease the impact of marketing on
shareholder value.
Our research also adds to the literature on the role that key marketing personnel play in improving rm value. To that end, Nath and
Mahajan (2008) found that rms with a CMO in their TMT perform
no better than rms without one. We suggest that while it is possible
that CMO presence in the TMT does not generally help rms (as
found by Nath & Mahajan, 2008), rms do benet from the presence
of CMOs in their TMTs in specic contexts, such as while changing
their names. By examining a unique context under which CMO presence increases rm value, we point to a more complex set of relationships between marketing's inuence in the TMT and value creation.
Thus, we add to recent literature (Verhoef & Leeang, 2009; Boyd
et al., 2010) that explores conditions under which key marketing
personnel contribute to rm value.
Our research also highlights the importance of analyzing rms'
motivation for taking strategic actions while exploring the value
impact of these actions. The importance of rms' motivation could
extend to other contexts besides name changes. For example,
rms acquiring a brand may be motivated by such goals as penetrating a new product category, consolidating its position in an existing
category, and expanding its customer base; these different motivations for acquiring a brand could also be valued differently by
investors.

S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

Finally, our results on the differential stock market response to

proactive and retroactive name changes highlight the importance
of studying the timing of rms' announcements. We thus add to
the scant literature on announcement timing, such as that on the
value of product preannouncements (Sorescu, Shankar, & Kushwaha,
2007). We also encourage future researchers to study other contexts
in which announcement timings may be critical. For example,
while the impact of M&A or marketing alliances on a rm's value
has been well explored (e.g., Swaminathan & Moorman, 2009;
Swaminathan, Murshed, & Hulland, 2008), investigating the optimal
timing of announcing M&As or marketing alliances are two important, hitherto unexplored, research areas.
4.2. Implications for practitioners
By shedding light on controllable rm-specic factors that significantly impact the stock market response to name changes, our research provides important guidance to rms contemplating a name
change.
Our results suggest that a rm planning to change its name
should consider appointing a CMO in its TMT to steer it through the
change process, and to maximize the market returns associated
with the name change. Prior research suggests that only about 50%
of Fortune 1000 rms have a chief marketing ofcer (CMO) in their
TMT (Nath & Mahajan, 2008). Our work indicates that in the context
of corporate name changes, a CMO plays a key role by helping select a
name that improves customers' perception of the rm, and by increasing investors' condence about the appropriateness of a change
in scope that the new name may foreshadow. Not surprisingly, for
the 80 rms in our sample that had a CMO in their TMT, the median
abnormal dollar value gain associated with the name change was
$5.2 million as compared to a median gain of only $1.5 million for
the 100 rms in our sample that did not have a CMO.
Given the reassurance a high degree of marketing inuence in the
TMT seems to provide investors about the appropriateness of a name
change, rms may also benet by having their CMOs feature prominently in external communication explaining the branding or
marketing-related rationale of the change. For example, if a rm
claims to change its name to improve customers' awareness of the
rm, investors may feel more condent about the name's claimed
impact on customer awareness if the claim is publicly explained
and supported by a marketing expert who serves as the voice of
the customer in the C-suite: the chief marketing ofcer. Similarly,
by having a CMO feature prominently in external communication
at the time of a name change announcement, rms may strengthen
investors' condence that the rm's decision to change its scope or
alter its strategic direction was carefully taken by the TMT after
closely analyzing the rm's core competencies, and competitive
landscape.
The signicant heterogeneity in the stock market response to name
changes also suggests that rms need to invest considerable time and
effort in selecting appropriate names. An analysis of the brand portfolios
from which brands were adopted as rm names suggests to us that to be
a suitable candidate for adoption as a rm name, an existing brand may
require the following characteristics: (1) A stronger customer awareness than the existing rm name, and (2) a signicant contribution to
the rm's overall sales. For example, with consumers being more
aware of the Macy's brand than the name Federated Stores, and with
90% of the rm's sales coming from the rm's 800-store Macy's chain,
the rm's adoption of the Macy's brand as its name made sense. Indeed,
this name change was associated with an abnormal stock return (using
the Carhart 4 factor model) of 1.65% and 4.62% in the [ 1 to + 1]
window.
Our results also suggest that if a rm's TMT is condent that a change
in product or geographical scope is likely to help improve the rm's future cash ows, the TMT should consider proactively changing its name

287

to communicate this upcoming change in scope. On the contrary, if

rms have already initiated a change in scope, they should expect
lower rewards from the stock market for changing their name to align
it with the new scope. Indeed, for our subsample of rms that changed
their name to proactively communicate a new scope, the median abnormal dollar value gain associated with the name change announcement
was $12.0 million as compared to a median abnormal dollar value loss
of $3.5 million for the subsample of rms that changed their names to
retroactively communicate a new scope.
Finally, our results indicate that high marketing capability and
high investments in advertising leading up to a name change provide effective signals to investors about a rm's ability and intention
to create a high degree of awareness of the new name, improving
the stock market response to the name change announcement.
These two rm-controllable marketing factors also help communicate to investors the condence that managers have in their rm's
future direction. We therefore suggest that rms that plan to
change their names should consider maintaining high levels of advertising intensity, and treat the development of strong marketing
capability as a key strategic priority. Furthermore, while investors
can easily observe rms' advertising outlays through their nancial
statements, it is relatively more difcult for investors to estimate
rms' marketing capability (Xiong & Bharadwaj, 2013). Given the
positive impact of marketing capability on investors' valuation of
name changes, our results therefore underscore the importance to
rms planning name changes of highlighting their marketing capabilities during investor events such as analyst conference calls and
shareholder meetings.

4.3. Limitations and future research

It is important to explore whether our results hold for non-U.S.,
private, and other public rms not listed on the major U.S. stock exchanges. Furthermore, researchers could also investigate the value of
other relatively uncommon types of pure name changes such as
name changes aimed at creating a separation between the rm's corporate and product brands (Muzellec & Lambkin, 2008). We also did
not include M&A-related name changes, as in most of such changes,
the announcement of the new name was concurrent with the announcement of the restructuring, making it impossible to parse out
the value of the name change. Furthermore, for such name changes
the impact of the name change on both the acquiring and the target
rm needed to be analyzed, and the contextual variables of both
rms needed to be explored, making it difcult for us to accommodate them in our framework. Given such unique complexities, it
may be more feasible to follow the lead of Knowles, Dinner, and
Mizik (2011), Lambkin and Muzellec (2008), and others by studying
M&A-related name changes exclusively.
Finally, prior researchers argue that stakeholder buy-in plays an
important role in making name changes successful (e.g., Merrilees &
Miller, 2008; Miller & Merrilees, 2013). To that end, we encourage future scholars to explore other strategic, cultural, and process-related
factors that improve the value of name changes by ensuring that key
stakeholders such as employees, suppliers, and customers understand
and support the proposed change.

Acknowledgment
An earlier version of this paper was published as part of the Marketing Science Institute Working Paper Series #09-212. The authors thank
Raji Srinivasan, Rajesh Chandy, Ross Rizley, and the faculty at University
of Texas at Austin, for their insightful comments on a previous version of
the paper. The authors also thank the editor, the AE, and three anonymous reviewers for their very constructive suggestions.

288

S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

Appendix A
Table A.1
Parameter estimates of marketing capability: Stochastic frontier estimation with natural logarithm of sales as output.
Variables

Parameter estimates
(standard error)

ln(Ad stock)
ln(SG&A stock)
ln(R&D stock)
ln(Receivables)
Constant
Random error
Inefciency error
Random error standard deviation
Inefciency error standard deviation
composite error variance (e2 = 2 + 2)
Ratio of inefciency error variance to random error variance 2
Wald 2(4)

1 = .065 (.036)*
2 = .110 (.035)***
3 = .0225(.0129)*
4 = .777 (.0361)***
0 = 3.388(.205)***
=.789 (.2745)***
= 1.412 (.167)***
= .674 (.0925)***
= 2.026 (.169)***
e2 = 4.557 (.639)***
2/ 2 = 3.006(.227)***
761.55***

Note: *p b .10, and ***p b .01, two-tailed. N = 180.

Ad stock, SG&A stock and R&D stock were calculated using a Koyck-Lag structure with a spillover weight of 0.5 and a lag of 1 to 5 years. For details of the stochastic frontier approach to
calculating marketing capability see Dutta et al., 1999.

Appendix B
Table B.1
Robustness to alternate estimation windows: Results of OLS regression with AR(0) calculated using different estimation windows as dependent variable.
Variables

Independent variables
Leveraging brand
Proactively communicating new scope
Marketing inuence in TMT (CMO presence)
Marketing investment (advertising intensity)
Marketing capability (efciency)
Controls
Major name change
Financial institution
Durables
B2B
Firm size (ln of total assets in $m)
Corporate branding
Past performance
Intercept
2
R
Overall F-test

Coefcients (t-values)
Model 1: Estimation window:
250 to 30 days

Coefcients (t-values)
Model 2: Estimation window:
175 to 26 days

Coefcients (t-values)
Model 3: Estimation window:
310 to 11 days

.026(3.66)***
.018(2.14)**
.019(3.21)***
.183(3.01)***
.030(2.47)***

.027(3.97)***
.026(3.61)***
.020(3.27)***
.183(2.96)***
.026(2.08)**

.024(3.52)***
.017(2.10)**
.019(3.18)***
.177(2.93)***
.029(2.39)**

7.2E4(.12)
.021(2.30)**
4.7E3(.67)
8.0E3(1.16)
4.7E3(3.23)***
.013(2.03)**
.013(.38)
9.0E3(.59)
36.0%
F(12,167) = 7.83***

2.0E3(.31)
.017(1.72)*
.006(1.05)
6.1 E3(.85)
4.4E3(2.99)***
.012(1.81)*
.013(.36)
6.2E3(.40)
33.9%
F(12,167) = 7.15***

.2.8E4(.05)
.019(2.14)*
7.2E3(1.05)
5.6 E3(.80)
4.3E3(2.99)***
.013(2.00)**
.010(.30)
.010(.72)
34.5%
F(12,167) = 7.33***

Note: AR(0) is calculated using Carhart 4 factor model. *p b .10, **p b .05, and ***p b .01, two-tailed. N = 180.

Appendix C
Table C.1
Robustness to alternate event windows: Results of OLS regression with different cumulative abnormal returns as dependent variable.
Variables
Independent variables
Leveraging brand
Proactively communicating new scope
Marketing inuence in TMT (CMO presence)
Marketing investment (advertising intensity)
Marketing capability (efciency)
Controls
Major name change
Financial institution
Durables
B2B
Firm size (ln of total assets in $m)
Corporate branding
Past performance
Intercept
2
R
Overall F-test

Coefcients (t-values)
Model 1: Dependent variable CAR(1,0)

Coefcients (t-values)
Model 2: Dependent variable CAR(1,+1)

.038(4.02)***
.032(2.81)***
.024(3.00)***
.063(1.77)*
.036(2.20)**

.030(2.50)**
.053(3.75)***
.032(3.18)***
.052(1.70)*
.033(1.79)*

.014(1.60)
.015(1.25)
.013(.92)
5.0E3(1.41)
5.9E3(3.00)***
.025(2.82)***
.016(.34)
.010(.51)
31.3%
F(12,167) = 6.35***

.013(1.25)
.011(.70)
.014(1.15)
.013(1.15)
1.7E3(1.77)*
.031(2.77)***
3.3E3(.06)
.051(1.96)*
24.2%
F(12,167) = 4.45***

Note: CARs are calculated using the Carhart 4 factor model. *p b .10, **p b .05, and ***p b .01, two-tailed. N = 180.

S. Kashmiri, V. Mahajan / Journal of Business Research 68 (2015) 281290

289

Appendix D
Table D.1
Robustness to alternative measures: Result of OLS regression with AR(0) as dependent variable using alternative measures of marketing inuence.
Variables
Independent variables
Marketing investment (advertising intensity)
Marketing capability (efciency)
Marketing inuence (based on CMO's compensation)a
Marketing inuence (based on CMO's rank)b
Leveraging brand
Proactively communicating new scope
Controls
Major name change
Financial institution
Durables
B2B
Firm size (ln of total assets in $m)
Corporate branding
Past performance
Intercept
R2
Overall F-test

Coefcients (t-values)
Model 1

Coefcients (t-values)
Model 2

.176(3.19)***
.028(2.53)***
.368(6.85)***

.141(2.45)**
.027(2.34)**

.020(3.06)***
.017(2.23)**

.064(5.37)***
.022(3.27)***
.023(2.91)***

1.4E3(.25)
.0180(2.24)**
7.9E3(1.23)
3.8E3(.61)
4.2E3(3.15)***
.015(2.51)**
7.0E3(.23)
.014(1.03)
46.8%
F(12,167) = 12.32***

5.2E3(.09)
.0179(2.13)**
7.4E3(1.15)
2.9 E3(.44)
3.5E3(2.50)**
.013(2.04)**
5.5E3(.17)
.018(1.28)
41.9%
F(12,167) = 10.10***

Note: AR(0) is calculated using the Carhart 4 factor model. **p b .05, and ***p b .01, two-tailed. N = 180.
a
Marketing inuence was measured as the compensation of the CMO as a percentage of the total compensation of all TMT members (a measure of inuence proposed by Finkelstein,
1992).
b
Marketing inuence was measured as the proportion of organizational levels in the TMT at or below the CMO's level (a measure used by Nath & Mahajan, 2011).

Appendix E
Table E.1
Predictive validity: Results of 10-fold cross-validation to assess forecasting performance.
Variables entered

Total variables in model

CV PRESS

Intercept
Leveraging brand
Marketing investment (advertising intensity)
Marketing inuence in TMT (CMO presence)
Proactively communicating new scope
Corporate branding
Firm size
Marketing capability (efciency)
Financial institution
Durables

0
1
2
3
4
5
6
7
8
9

.3566
.3291
.2980
.2780
.2670
.2633
.2568
.2560
.2502
.2506 N .2502

Note: Following Geyskens et al. (2002) and Dekimpe, Francois, Gopalakrishna, Lilien, and Van den Bulte (1997), our original sample was randomly partitioned into 10 subsamples of
roughly equal size. Of the 10 subsamples, a single subsample was initially retained as the validation set for testing the model, and the remaining 9 subsamples combined were used as
the training set for tting the sample. The cross-validation process was repeated 10 times, with each of the 10 subsamples used exactly once as the validation set. The results from the
10 iterations were then averaged to produce a single estimation. This approach allowed us to drop independent variables that did not contribute toward predictive accuracy. The predictive
validity statistic we report is Cross-Validation Predicted Residual Sum of Squares or CV PRESS where the mean square error (MSE) of prediction is calculated by the formulae: MSE (of
prediction) = CVPRESS/n, with n being the total sample size. The model with the smallest CV PRESS was selected as the model with the best predictive validity. We found that the CV
PRESS score of this parsimonious 8-variable model was .2502, which translated into an MSE of prediction of .00139. Our MSE of prediction was only 3.7% higher than the MSE of estimation
of the same 8-variable model prior to 10-fold cross-validation, which compares favorably with the predictive validity test results reported in prior event studies. For example, for the model
used by Geyskens et al. (2002), the MSE of prediction after 10-fold cross-validation was reported to be 8.6% higher than the MSE of estimation. Thus, all in all, the forecasting performance
of our parsimonious model was reasonable.

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