Corporate Sustainability and Market Response According to the Name Change Strategy: Focusing on Korean IT Industry Firms

Abstract

This study seeks to determine whether corporate sustainability increases due to the corporate name change strategy by analyzing the sample of IT companies listed on the KOSDAQ market from 2010 to 2019, through the event study methodology and OLS regression. This study has the following conclusions: first, the analysis results show that if the market response to an IT company’s corporate name change is positive, its financial constraint improves after the name change. Second, even if the companies’ financial constraint conditions before the corporate name change differ, their financial constraints improve after the name change if the market response to their announcements to change their corporate names is favorable. In other words, in terms of corporate sustainability, the financial constraint of a company improves depending on how it establishes the strategy to change its corporate name as well as the level of the market response to the announcement to change its corporate name. This implies that an IT company’s strategy to change its corporate name can affect corporate sustainability. Consequently, from the perspective of IT companies, this study serves as a guide for stakeholders’ decision-making processes and proves that the financial constraint can be improved through a corporate name change strategy.