Analysis of Relationship between Long-Term Market Reaction and Financial Stability Resulting from Corporate Name Changes: Focusing on IT Firms

Abstract

The purpose of this study is to analyze the variance in the impact of market response on a firm's financial stability subsequent to a corporate name change, based on whether or not it is delistable. In view of this, a regression analysis was conducted on IT firms listed on the KOSDAQ market spanning the years 2000 to 2019. The main findings are as follows. First, the higher the market response to the corporate name change, the higher was the firm's financial stability. Second, financial stability varies depending on the potential for delisting. In other words, for firms classified as delistable (listable), the implementation of corporate name change triggers a negative (positive) effect on their financial stability. Third, regardless of the delisting status, the better the market response to the corporate name change strategy, the more positive is the impact on the financial stability of both groups. These findings are reaffirmed through robustness analysis, and it is confirmed through additional analysis that they are maintained for a protracted period of 3 years. Therefore, this study posits that KOSDAQ IT firms can elicit different market reactions depending on how they plan their corporate name change strategy, thereby potentially influencing their financial stability.