Nomen Est Omen: How Company Names Influence Short- and Long-Run Stock Market Performance

Abstract

I use a survey methodology to obtain consensus ratings of 64 Swiss company names. The survey evidence suggests that simple cognitive company name characteristics do affect the buy and sell decision of respondents. Furthermore, I find that respondents attribute positive stock performance rather to a nice name than to an ugly name. In the empirical results I present new evidence on IPO underpricing for the Swiss stock market. Further results indicate that not only do firms with a favourable name rating exhibit significantly higher initial returns upon going public, but also exhibit higher (abnormal) stock returns up to 10 trading days after the initial offering. Subsample analysis and the application of standard benchmark-adjusted return measurement techniques reveals that the effect correlates highly with hot issue markets.

Keywords: initial public offerings, hot markets, bubbles, heuristics

JEL Classification: G12, G14, G32