Reputational damage and name changes: Impact of financial crimes

Abstract

Research Question: This study examines the relation between reputational issues and name-change decisions among US financial firms. I examine if financial firm name changes are related to reputational concerns and whether or not financial firms try to distance themselves from misconduct by adopting a new name. Research Findings/Insights: I document that firms adopt a new name to disassociate themselves from reputational concerns. I find that investors react negatively to name-change announcements for firms with reputational issues. My findings also suggest significant corporate upheaval following misconduct, such as dampening performance. Theoretical/Academic Implications: My research is the first to investigate market reactions to name changes in the US financial industry. My paper utilizes several unique hand-collected datasets of corporate wrongdoings, violations, frauds, and other financial crimes to measure firm reputation and test whether name changes are related to reputational concerns. Practitioner/Policy Implications: I not only measure pre-event misconducts for name changes but also analyze the future firm performance following financial misrepresentations. My paper adds to the growing literature of firm reputation, brand image, and firm value.