An Empirical Study On The Effect Of The Rename Of Stocks Of Listed Companies

By using the method of event study, this dissertation studies on the abnormal reactions of the trading volume and returns around the period of the rename announcement of the stock to test the degree of efficiency and gravity of subject promotional hype. The purpose of this study is to offer advice and reference to better supervising measures and to improve efficiency of the stock market. The following are the main conclusions of this dissertation. Firstly, the obvious stock price fluctuation, the increasing trading volume around the period of the rename of the stock and an unduly quick overreaction to the rename announcement in market indicate that our stock market acts counter to the hypothesis of weak-form efficiency and semi-strong-form efficiency. Secondly, the analysis of three events with different causes reveals that investors' reaction to the rename caused by the change of the No. 1 stockholder is stronger than that of the changed caused by the mainstay business. The size of the company with the change of the No.1 holder is apparently smaller than that with the change of the mainstay business, thus the stock price of the former is evidently higher than the latter. Though there is an advance reaction to the former but not to the latter, there is an overreaction to both after the rename announcement. Thirdly, investors' reaction to new names containing "tech-"words is stronger than those without. In 2000, the reaction to the new names containing "tech-"words was stronger. But in 2001, there was no much difference between the reactions to the new names with "tech-"words and those without. Meanwhile, the reaction to the new names with "tech-"s of the Year 2000 was stronger than that of the Year 2001. This illustrates that there has been severe conceptual and subject matter hype in our stock market. Fourthly, abnormal trading volume and returns havepositive correlation with the absolute value of abnormal returns. Further analysis proves that the abnormal trading volume and returns have asymmetrical correlation and it also shows that there are blind reactions among the investors in our country. Fifthly, the abnormal trading volume has a negative correlation with the size of the company. And there is a great difference between the trading reactions to the year 2000 and to the year 2001. Sixthly, the analysis of the reaction during the two years around the rename announcement indicates that those companies got hype long before the rename, and the stocks bankers took the advantage of the rename to sale their stocks in large quantities. The seventh, the comparison of a company's ROE and EPS of the year before the rename with that of the year after the rename shows no improvement in its operational achievement after the renaming. And three pieces of advice are proposed based on the result of the study. First, we should strengthen the supervising measures and keep on improving the supervising system, especially the publicity of information. Second, we should restrain the bankers from hyping to create a rational market. Third, we should carry on expanding the size of the stock market. Finally, we should carry out efforts to promote the growth of institutional investors.