Abstract
The market reaction on changes in corporate's name on the Indonesia Stock Exchange. This study tried to investigate empirically market reaction over the announcement of corporate name changes of companies on the Indonesia Stock Exchange. The market reaction is measured by using abnormal return with a single index model approach. The database of corporate name change announcements on the Indonesia Stock Exchange has obtained from an annual fact book report. The sample of this study consists of the companies that make a name change from 2005 to 2017. Hypothesis test uses one sample t-test. This research's result proves that there was a positive and significant market reaction to the corporate name change announcement. Moreover, This research’s result shows that there was a positive and significant reaction on the corporate name change announcement which is included on major change while at the corporate name change announcement which included on minor change there was no significant market reaction.
Highlights
The company name has a function as an organizational identity and is used as a strategic tool in a company
In accordance with the research of (Bosch and Hirschey, 1989) and (Kot, 2011), this study proved that positive and significant reactions were greater in major name changes than minor name changes
A significantly greater positive market reaction occurs in major name changes and there is no significant market reaction to minor name changes
Summary
The company name has a function as an organizational identity and is used as a strategic tool in a company. His research is using a sample of companies based in China but shares are traded on US exchanges. It was discovered that some companies made changes to their names. (Bosch and Hirschey, 1989) stated that the reason for creating a new image of the company for stakeholders was the main motivation for the company to make a name change. The other reason for companies to change names according to (Bosch and Hirschey, 1989) is that the company would like to set a better business focus on several business sectors, to reflect changes in the company's product line, to prevent market "confusion" over the company's image compared to competitors, to reflect the restructuring process carried out by the company, to reflect diversification strategies
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