Journal of Corporate Finance Vol. 11 No. 1-2 2005
Managerial actions in response to a market downturn: valuation effects of name changes in the dot.com decline
Abstract
We investigate stock price reactions to Internet-related name changes in a market downturn. In contrast to the Internet boom period, during which there was a surge of dot.com additions, in the bust period, there is a dramatic reduction in the pace of dot.com additions accompanied by a rapid increase in dot.com name deletions. Following the Internet “crash” of mid-2000, investors react positively to name changes for firms that remove dot.com from their name. This dot.com deletion effect produces cumulative abnormal returns on the order of 64% for the 60 days surrounding the announcement day. Our results add support to a growing body of literature that documents that investors are potentially influenced by cosmetic effects and that managers rationally time corporate actions to take advantage of these biases.
- DOI
- 10.1016/j.jcorpfin.2004.02.005
- Volume
- 11
- Issue
- 1-2
- Pages
- 319-335
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib