There’s Something in a Name: Value Relevance of Congruent Ticker Symbols

Abstract

Choosing assets for their portfolios is a complex decision, and investors, endowed with limited information processing capacity are influenced by various psychological factors. One such factor is investors' processing fluency with the firm's stock. In this paper, we introduce the idea of congruent ticker symbol, defined as whether or not the firm's ticker symbol is similar to its corporate name (e.g., DELL for Dell, Inc.) Further, we propose that a firm's congruent ticker symbol, in conjunction with other firm characteristics, will increase investors' processing fluency with its stock and, therefore, affect its intangible value. We consider the firm's size, performance, advertising, and distribution presence as firm characteristics that will interact with congruent ticker symbol to affect its intangible value. Data from 181 publicly listed US retailers between 1994 and 2006 strongly support the hypotheses relating the contingent effects of congruent ticker symbols to intangible value. While, firms' congruent ticker symbols do not independently increase their intangible values, they do so, in conjunction with their performance, advertising, and distribution presence. For marketing theory, congruent ticker symbols emerge as contingent intangible market-based assets that create enduring shareholder value with other firm characteristics. For managerial practice, the findings offer guidance on ticker symbol-naming strategies that can increase shareholder value.