The Wealth Effects of Oil-related Name Changes on Stock Prices: Evidence from the U.S. and Canadian Stock Markets

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx

ContentslistsavailableatScienceDirect

Journal

of

International

Financial

Markets,

Institutions

&

Money

j o u r n a l h o m e p a g e :w w w . e l s e v i e r . c o m / l o c a t e / i n t f i n

The

wealth

effects

of

oil-related

name

changes

on

stock

prices:

Evidence

from

the

U.S.

and

Canadian

stock

markets

Hsiao-Mei

Lin

_,

_Robert

_(Chi-Wing)

_Fok

_,

_Shih-An

_Yang

_,

_Yuanchen

_Chang

a_{DepartmentofFinance,AsiaUniversity,Taichung,Taiwan}

b_{CollegeofBusiness,Economics,andComputing,UniversityofWisconsin-Parkside,Kenosha,WI,USA} c_{DepartmentofFinance,NationalChengchiUniversity,Taipei,Taiwan}

a

r

t

i

c

l

e

i

n

f

o

Corporatenamechange Oilprice Eventstudy JELclassification: F31 F33 G14 G15

a

b

s

t

r

a

c

t

Thispaperexaminesthevaluationeffectsofcorporatenamechangesinvolvingoil-related

termsintheU.S.andCanadianstockmarkets.WeshowthatrelativelymoreU.S.companies

addoil-relatedtermstotheircorporatenamescomparedtoCanadianfirms.Investorsin

theU.S.marketreactmorepositivelytowardsfirmsexperiencingoil-relatednamechanges

duringtherecentoilpricesurge.Ontheotherhand,theresultsindicatethattheoil-related

namechangeeffectsappeartobetransitoryintheCanadianmarket.Namechanges

trig-gerpositivereturnssurroundingtheannouncementday,butthenegativepost-eventdrift

largelycancelstheeffect.Moreover,investorreactionstooil-relatednamechangesare

associatedwiththecompany’sactualinvolvementintheoilindustry.

©2015ElsevierB.V.Allrightsreserved.

1. Introduction

Thispaperexaminestheimpactofrisingoilpricesoncorporatenamechangebehaviorandthewealtheffectsofcorporate namechangesinvolvingoil-relatedterms.Thepriceofcrudeoilwasstableandunder$30perbarrelbefore2004,yetaseries ofeconomicandpoliticaleventsledthepricetohitover$100perbarrelinFebruary2008.Itremainstobeseeniftherising oilpricehasanimpactonthestockmarkets.KilianandPark(2007)provideevidencethattheresponseofaggregatestock returnsmaydifferdependingonwhethertheincreaseinthepriceofcrudeoilisdrivenbydemandorsupplyshocks.They showthatnegativestockreturnsareassociatedwithhigheroilpriceswhenmarketsareaffectedbyspecificdemandshocks thatreflectfearsabouttheavailabilityoffutureoilsupplies.Incontrast,positiveshockstotheglobalaggregatedemandfor industrialcommoditiescancausebothhigheroilpricesandhigherstockprices.

Theadverseeconomicimpactsofthe2007–2009financialcrisisarewell-documented.Thefinancialcrisistriggeredthe longestrecessionsincetheGreatDepressionintheU.S.,withfarreachingimpactsaroundtheworld.Asthefinancialcrisis

∗ Correspondingauthor.Tel.:+866229393091x81102;fax:+866229393394.

E-mailaddresses:umekolin@yahoo.com.tw(H.-M.Lin),fok@uwp.edu(R.Fok),yccchang@nccu.edu.tw(Y.Chang).

1 _{Tel.:+866423323456x48032.} 2 _{Tel:+12625952460.}

http://dx.doi.org/10.1016/j.intfin.2015.07.003

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

2 H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx

intensifiedinmid-2007,theoilpricecontinueditssurge.Wealsoexamineifthefinancialcrisisimpactedthewayinvestors respondtooil-relatednamechangesevenwhentheoilmarketissurging.

Tothebestofourknowledge,noempiricalresearchhasbeenconductedontherelationshipbetweenanoilpricesurgeand corporatenamechangebehavior.Weaskthefollowingquestions:Docompaniestendtoaddtheword“oil”or“petroleum”to theirnamesduringarisingoilprice?Whatarethewealtheffectsofnamechangesinvolvingoil-relatedterms?Didinvestors reactdifferentlytotherelatednamechangesduringtherecentfinancialcrisis?Toanswerthesequestions,wecomparethe wealtheffectsofcorporatenamechangesasmeasuredbyabnormalreturnsaroundtheirannouncementdateintheU.S.and CanadianstockmarketsfromJanuary2000toJune2009.

Theacademicliteraturehasfoundmixedevidenceonthevaluationeffectsofcorporatenamechanges.Earlyevidence findsnostatisticallysignificantwealtheffectsassociatedwithcorporatenamechanges(Howe,1982;KarpoffandRankine, 1994),butthedot.comphenomenonprovidescontrastingresults.Cooperetal.(2001)documentsignificantandpositive marketreactionstothechangesofinternet-relateddot.comnames.Theysuggestthattheeffectsofcorporatenamechanges areassociatedwithinvestormaniadrivenbyapricepressure-inducedbubbleinthestockmarkets.Astheinternetbubble burst,thewealtheffectofcorporatenamechangescontinuedtoexist,butoperatedinareversedirection.Cooperetal. (2005)noteapositivemarketreactiontonamechangesforfirmsdeleting“dot.com”,“dot.net”,and“internet”fromtheir nameswhentheinternetmaniawasover,concludingthatinvestorsareaffectedbycosmeticchangesandmanagerstryto takeadvantageofinvestorsentimentbychangingcorporatenames.

Inthisstudyweexaminewhetherthewealtheffectsofcorporatenamechangesareinfluencedbythechangesofoil pricesandtheoutbreakoftherecentfinancialcrisis.Ourstudycontributestothecurrentliteratureinseveralways.First, therecentoilpricesurgeprovidesusanopportunitytorevisittheclaimmadebyCooperetal.(2005)thatmanagerstake advantageofinvestors’biasbychangingcorporatenamesconditionalonmarketconditions.Second,mostpreviousstudies ontheeffectsofcorporatenamechangesfocusonsamplefirmsfromdifferentindustries1_{,butlumpingfirmsfromdifferent}

industriesmayresultinaggregationbias.Koku(1997)examinestheimpactofnamechangeswithafocusontheservice industryandfindspositivereactionstocorporatenamechanges.Asnostudyhasyettoinvestigatethemarketeffectsof corporatenamechangesinasingleenergyindustry,welooktofillthisgapbyexaminingtheeffectsofcorporatename changesrelatedtotheoilindustry.Third,wecomparethewealtheffectsofcorporatenamechangesbetweentheU.S.and Canadianstockmarkets.Weshowthatthepatternofnamechangesandpricereactionsarebothdifferentbetweenthese twocountries.Fourth,oursamplingperiodincludestherecentfinancialcrisis,whichallowsustoexaminetheinfluenceof thecrisisonthewealtheffectsofcorporatenamechanges.

OurresultsshowdifferentrelationsbetweenmarketconditionandnamechangebehaviorintheU.SandCanadian markets.IntheU.S.,mostcorporatenamechangesinvolvingoil-relatedtermsoccurredwhentheoilpricewassurging, whereasthemarketconditionhadlessofanimpactonthenamechangebehaviorofCanadianfirms.Thisfindingmay explainthedifferenceinthewealtheffects ofcorporatenamechangeannouncementsbetweentheU.S.andCanadian markets.

Marketconditionplaysanimportantroleindeterminingthewealtheffectsofoil-relatednamechangesintheU.S.markets. Duringthenormalmarketperiod,nosignificantmarketresponseisfoundinbothU.S.andCanadianmarkets.Whentheoil priceissurging,persistentandsignificantlypositivewealtheffectsexistintheU.S.markets.However,thepositivewealth effectsvanishedafterincludingtheportionofthefinancialcrisisperiodthatsawasurgingoilprice.Canadianmarkets showeitherinsignificantornegativelysignificantabnormalreturnsinlimitedcases.ComparedtoU.S.investors,Canadian investorsarelessresponsivetooil-relatednamechanges.Whilethenatureofnamechangesinfluencesthewealtheffects ofcorporatenamechanges,theimpactsvaryacrossmarketconditionsintheU.S.markets.InvestorsintheU.S.reactmore positivelytonamechangesthatareaddingoil-relatedterms,butonlyduringthehotoilmarketperiod.Ontheotherhand, namechangesthataredeletingoil-relatedtermsyieldsignificantandnegativemarketreactionsduringthefinancialcrisis period.Minornamechangesareinconsequential,whilemajornamechangesresultinpositivewealtheffectsduringthehot marketperiodandnegativewealtheffectsduringthefinancialcrisisperiod.Similarly,firmsinoil-relatedsectorsgenerate positivewealtheffectsduringthehotmarketperiod,andfirmsinoil-unrelatedsectorsgeneratenegativewealtheffects duringthefinancialcrisisperiod.FortheCanadianmarkets,thenatureofnamechangeshasnoinfluenceonthewealth effectsacrossdifferentsub-sampleperiods.OurfindingsforU.S.marketsareconsistentwiththehypothesisthatcompanies trytocaptureinvestorbiasbychangingtheircorporatename,whiletheresultsforCanadianmarketsaremorealignedwith therationalpricinghypothesis.

Theremainderofthearticleisorganizedasfollows.Section2discussestheliterature.Section3describesoursampleand theeventstudymethodologythatweuse.Section4presentsanddiscussestheempiricalresults.Section5offerspossible explanationsofthedifferentwealtheffectsbetweentheU.S.andCanadianmarkets.Section6containsrobustnessresults. Section7concludes.

1 _{Lee(2000)controlsforindustryeffectbyincludingdummyvariablesintheregressionanalysis.However,nodetailsoftheresultsareprovided.Itis}

notclearhowmanydifferentindustriesareincludedinthesampleandwhetherthecoefficientsoftheindustrydummiesaresignificantornot.Moreover, anindustrydummyisnotlikelytocompletelymitigatetheimpactofindustryeffects.

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx 3

2. Wealtheffectsofcorporatenamechanges

Becausecorporatenamechangesarecostlyandfirmnamesarerelatedtocertainqualitiesoffirmperformance,itis naturaltoevaluatethepriceimpactofcorporatenamechanges.Therearetwodifferenthypothesesintheliteratureonthe priceeffectsofcorporatenamechanges.Therationalpricinghypothesissuggeststhattheannouncementeffectistransitory andthereisinsignificantexcessreturnaroundtheannouncementdate(Howe(1982),andKarpoffandRankine(1994)).The investormaniahypothesis(Cooperetal.,2001)arguesthatinvestorsareeagertobeassociatedwiththehotmarketatall costsandpricereactiontocorporatenamechangesduringthehotmarketissignificantandpositive.

Howe(1982) argues that information asymmetriescan explain why wealtheffects of companyname changes do exist. Heshows that in thesituation of quality uncertainty, high quality firms’ stock prices can benefit from name changes.Usingeventstudymethods,heconcludesthatthereisnostatisticallysignificantwealtheffectintheU.S. mar-ket.KarpoffandRankine (1994)examineU.S.corporatenamechangesfrom1979to1987and findsimilarresults.On theotherhand,recent empiricalevidenceusingdatafromtheinternet bubbleperiod showsdifferentresults. Cooper etal.(2001)documenta positivestockpricereactiontothechanges ofinternet-relateddot.comnames.Cooperetal. (2005) show that investors were deceived by companies seeking to bedisassociated from the internet industry by deleting“dot.com”,“dot.net”or“internet”fromtheircorporatenamesduringtheperiod1998–2001.Theseresults sug-gestthatcorporatenamechangeeffectsareassociatedwithinvestormaniadrivenbyapricepressure-inducedbubble in thestock markets,and managers take advantage of investor sentiment by changing corporate names to capture gains.

Previousstudiespresentconflictingresultsontheimpactsofcorporatenamechangesindifferentcountries.Forexample,

Josevetal.(2004)examine107firmsthatunderwentcorporatenamechangesfrom1995to1999inAustralia.Theyfindthat namechangesareassociatedwithanegativeimpactonstockpricesintheireventperiods.Karbharietal.(2004)analyze theKualaLumpurStockExchangebetween1984and1996andshowcorporatenamechangeshavenowealtheffectson shareholders.Aspreviousevidenceforinternationalmarketsismixed,morestudiesonthewealtheffectsofcorporatename changesacrossdifferentmarketsarewarranted.

ManypeopleassumethattheCanadianstockmarketissimilartotheU.S.marketduetogeographicproximityand economicintegrationbetweenthetwocountries,butthisassumptionhasrarelybeenexamined.PreviousstudiesontheU.S. andCanadianmarketsmainlyfocusontheissuesofintegrationorsegmentationbetweenthetwocountries.Forexample,

FoersterandKarolyi(1993)andFoersterandKarolyi(1998)examinetheshort-runcrossmarketdependenceinreturns andvolatilitybetweentheU.S.andCanadianmarkets.TheyinvestigatestockpricemovementsofCanadianfirmsbefore andaftertheycross-listedin theU.S.Theirresultsindicatethatsomedegreeofsegmentationexistsbetweenthetwo markets.

In this paper we compare the wealth effects of corporate name changes in the U.S. and Canadian markets over different market conditions. If the presumption of investor irrationality is correct, then market responses to corporatenamechangesshouldbeasymmetricacrossdifferentmarketconditions.Theinvestor-maniahypothesis pre-dicts a stronger market reaction to oil-related name changes in a hot market. If investors are rational, then their responsestoname changesshouldbeless sensitivetochanges inmarket conditions.Othernon-market factors,such as the nature of the name change, may be more important in explaining the market response to corporate name changes.

Namechangeisasignalconveyedbyfirmstotheirinvestors.Thenatureandthestrengthofinformationcontent embed-dedinanamechangevaryacrosstypesofnamechanges.Toaddressthisissue,weinvestigatethewealtheffectsofthe followingthreecategoriesofnamechanges:(1)addingversusdeletinganoil-relatedword,like“oil”or“petroleum”;(2) majorversusminornamechanges;and(3)namechangesoffirmsinoil-relatedsectorsversusnamechangesoffirmsin oil-unrelatedsectors.

3. Dataandmethodology

3.1. Datadescription

OursampleconsistsofcompaniesthatchangedtheircorporatenamesintheU.S.andCanadianmarketsfromJanuary 2000toJune2009.TheU.S.companiesaretradedin theNew YorkStock Exchange(NYSE),AmericanStockExchange (AMEX),NationalAssociationofSecuritiesDealersAutomatedQuotationSystem(NASDAQ),orOvertheCounterBulletin Board(OTCBB).TheCanadiancompaniesaretradedintheTorontoStockExchange(TSX),VentureExchange(TSXVenture), orNEXBoard(NEX).Wesearchforcorporatenamechangesthatareassociatedwiththeword“oil”or“petroleum”and crosscheckoursamplefirmswiththeMergentEventData.Theinitialsampleconsistsof330announcementsofrelevant namechanges.Sincetheinformationofnamechangesmaybereleasedtothemarketbeforebeingofficiallyannouncedby thestockexchanges,wealsosearchnewsreportsforannouncementofcorporatenamechanges.Weconsidertwopossible choicesoftheannouncementday(ortheeventday):(1)thedaywhenthestockexchangesannouncedthecorporatename changes;and(2)thefirstavailabledayofnewsconcerningthenamechangesintheFactivadatabase.Weusetheearlierday betweenthesetwodatesastheeventday.

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

4 H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx Table1

Datadescription.Thistabledescribesthesamplecompaniesthatchangedtheirnamesinvolvingtheword“oil”or“petroleum”fromJanuary2000toJune 2009.Firmsaredividedintothreesubcategories.Category1:firmsadding“oil”and“petroleum”totheirnamesversusfirmsdeleting“oil”and“petroleum” fromtheirnames.Category2:majorversusminornamechanges.Category3:firmsinoil-relatedsectorsversusfirmsinoil-unrelatedsectors.Thefull sampleperiodisalsodividedintothreesub-periods:normalmarketperiod(January2000–December2003),hotmarketperiod(January2004–June2007), andfinancialcrisisperiod(July2007–June2009).

Sub-categories All U.S. Canada Initialnumberoffirmsinsample 330 181 149 Deletedduetomergerandacquisitionorothercorporateevents 101 42 59 Deletedduetolackofpriceorvolumedata 84 36 48

Deletedmarketvalueequalszero 7 7 0

Deletednewandoldnamesbothwith“oil”or“petroleum” 31 27 4

Totalnumberofremainingfirms 107 69 38

Category1 Additionofoil-relatedterm 63 40 23 Deletionofoil-relatedterm 44 29 15

Category2 Majornamechanges 85 58 27

Minornamechanges 22 11 11

Category3 Oil-relatedsector 83 47 36

Oil-unrelatedsector 24 22 2 Sub-sampleperiods Normalmarketperiod 34 13 21 Hotmarketperiod 47 35 12 Financialcrisisperiod 26 21 5

Dailystockreturns,benchmarkindices,andoilpriceareobtainedfromDatastream2_{.Wedelete84namechangesdueto}

insufficientpricedataand101namechangesduetoconcurrentannouncementsofmergers&acquisitions,divestiture,and othermajorcorporateevents.Thefinalsampleconsistsof107namechangesinvolvingtheword“oil”or“petroleum.”Table1

summarizestheinformationofoursample.Weclassifythesampleintothreecategoriesbasedonthefirm’scharacteristics andthenatureofnamechanges.Category1separatesnamechangesthataddtheword“oil”or“petroleum”fromthose thatdeleteoil-relatedterms.Morethanhalfofthe107namechangesaddtheword“oil”or“petroleum”tothecorporate nameforthecombinedsample.Therearemorefirmsaddingthandeletingoil-relatedtermsinboththeU.S.andCanadian samples.

Category2distinguishesbetweenmajorandminornamechangesfollowingBoschandHirschey(1989).Amajorname changereferstothecasethatthenewcorporatenameisentirelydifferentfromtheoriginalname.Aminornamechange allowsinvestorstoidentifytheassociationwiththeoriginalname.Forexample,thechangefromBentonOil&GasCo.to HarvestNaturalResourcerepresentsamajornamechangesincethetwonamesdonotresembleoneanotherinanyway. Ontheotherhand,thechangefromTesoroPetroleumCorporationtoTesoroCorporationrepresentsaminornamechange. Themajorityofcorporatenamechangesinoursamplearemajorchanges.Thepercentageofmajornamechangesforthe combinedsample,U.S.sample,andCanadiansampleis79%,78%,and81%,respectively.

Category3separatesfirmsinoil-relatedsectorsfromthoseinoil-unrelatedsectors.Thisclassificationconsidersthecore businessofcompaniesbasedonthesectorspecificationinDatastream.Ifafirm’scorebusinessisnotoil/gasproductionor oilequipmentandservice,thenthefirmisinanoil-unrelatedsector.Forexample,WilshireOilCompanyofTexaschanged itsnametoWilshireEnterprise,Inc.AccordingtothesectorclassificationofDatastream,WilshireEnterprise,Inc.isinthe realestateinvestmentandservicessector.Therefore,thisnamechangeisunderthecategoryofoil-unrelatedsectors.We hypothesizethatifacompanybelongstoanoil-relatedsector,theninvestorsarelesslikelytobelievethenamechange isartificial.Therearemorefirmsinoil-relatedsectorsthanthoseinoil-unrelatedsectorsinboththeU.S.andCanadian markets.ThedistributionismoreskewedintheCanadianmarket,as36outof38namechangesthereareinoil-related sectors.

Toexaminethewealtheffectsofnamechangesunderdifferentmarketconditions,wedivideoursampleintothree sub-periods:normaloilmarket,hotoilmarket,andthefinancialcrisisperiod.AsshowninFig.1,thecrudeoilpriceshowsa sustainableupwardtrendthatstartedfromthefirstquarterof2004.Therefore,wechooseJanuary2004asthecutoffpoint betweennormalandhotoilmarkets.Astheoilpricestartedsurgingin2004andreacheditspeakonJuly2008,weexpect thatthe2007–2009financialcrisisdidaffectinvestorsentimentsandthusinfluencedinvestors’reactiontocorporatename changes.Thereisnoconsensusonexactlywhentherecentfinancialcrisisstarted,butmostpeopleagreethatthecrisis explodedinmid-2007whenBearStearnshaltedredemptionsfortwoofitshedgefunds.Astherecentrecessiontriggered bythefinancialcrisisofficiallyendedinJune2009,wedefinethefinancialcrisisperiodasJuly2007–June2009.Toisolate thepotentialimpactofthefinancialcrisisonmarketreactiontocorporatenamechangesinvolvingoil-relatedterms,we focusonthehotoilmarketperiodthatdoesnotoverlapwiththefinancialcrisis.Therefore,ourhotoilmarketperiodstarts inJanuary2004andendsinJune2007.Forthecombinedsample,thenumberofnamechangesduringthenormalperiodis lessthanthatforthehotmarketperiod(34versus47).MoreU.S.firmschangedtheirnameduringthehotoilmarketperiod

2 _{MarketvalueinDatastreamisthesharepricemultipliedbythenumberofordinarysharesoutstanding.WeusetheDatastreamNorthAmericaOil&}

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx 5

Fig.1. OilpricetrendandchangesofcorporatenameswithadditionsanddeletionsofoilfromtheirnamesintheU.S.andCanadianmarkets(fromJanuary 2000toJune2009).

thanduringthenormalperiod(35versus13),whilemoreCanadianfirmschangedtheirnamesduringthenormalperiod thanthehotmarketperiod(21versus12).ItseemsthatU.Sfirmsaremorelikelytocaptureinvestorsentimentbychanging theircorporatenamesduringthehotmarket.TimingthemarketforcorporatenamechangesisnotevidentintheCanadian market.

Fig.1showsthenumberofnamechangesaddinganddeletingtheword“oil”or“petroleum”togetherwiththetrendof crudeoilprice.Beforethefirstquarterof2004,wefindnoparticularrelationbetweenthenumberofnamechangesadding anddeletingoil-relatedterms.However,inthehotmarketperiod,thenumberofnamechangesaddingoil-relatedterms increasessubstantiallyandoutweighsthenumberofnamechangesdeletingoil-relatedterms.

Table2reportsthenumberofdifferenttypesofnamechangesduringoursampleperiod.PanelAofTable2showsthat thelargestnumberoffirmswithoil-relatednamechangesoccurredin2005,whichmaybeduetothefactthattheoilprice hitahighin2005andthendroppedfrom$77.03perbarrelinthebeginningof2006to$56.27perbarrelbyNovember2006. Therearemorenamechangeswithanadditionratherthanadeletionofoil-relatedtermsduring2003–2007.PanelBshows thatmajornamechangesoutnumberminornamechangesineachyearofoursampleperiod.PanelCshowsthatthenumber ofoil-relatednamechangesintheU.S.marketincreasessharplyin2004–2005,indicatingthat,comparedtoCanadianfirms, U.S.firmsaremorelikelytosignaltheirassociationwiththeoilindustrywhentheoilpriceissurging,whichisasignfor capturinginvestorsentiment.

3.2. Methodology

Thispaperemploysthestandardeventstudymethodology.Wecomputeabnormalreturnsinthefollowingways.First, foreachsecurityi,themarketmodelusedtocalculatefordaytis:

Ri,t=˛i+ˇiRm,t+εi,t, (1)

whereRitisthereturnforfirmiondayt,andRmtisthemarketreturnusingtheDatastreamNorthAmericaOil&Gasstock

priceindexfrom(−120,−16).Wecomputeabnormalreturns(AR)forfirmiondaytasfollows:

AR_it=Rit−˛i−ˇiRmt. (2)

Wethencomputethecumulativeabnormalreturn(CARi)forfirmiforvariouseventwindowsfromt=jtot=kas:

CAR_i=

k



t=j

AR_it. (3)

Themeancumulativeabnormalreturn(CAR)ofNfirmsis:

CAR=



i=1CARi

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

6 H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx Table2

Distributionofnamechangesbythecharacteristicsofthechanges.Thistablepresentsthedistributionofnamechangesbasedonthethreecategoriesas definedinTable1.PanelAshowsthedistributionofnamechangesaddinganddeletingtheword“oil”or“petroleum”;PanelBshowsthedistributionof majorandminornamechanges;andPanelCshowsthedistributionofnamechangesforfirmsinoil-related/oil-unrelatedsectors.

PanelA:addition/deletionofoil-relatedterm

Year Addition Deletion

Allfirms U.S. Canada Allfirms U.S. Canada

2000 2 0 2 6 3 3 2001 2 0 2 3 2 1 2002 4 2 2 4 1 3 2003 8 3 5 5 2 3 2004 11 7 4 3 2 1 2005 12 9 3 8 7 1 2006 7 6 1 1 1 0 2007 9 6 3 4 3 1 2008 6 5 1 8 6 2 2009Q2 2 2 0 2 2 0

PanelB:majornamechange/minornamechange

Year Majornamechange Minornamechange

Allfirms U.S. Canada Allfirms U.S. Canada

2000 8 3 5 0 0 0 2001 3 1 2 2 1 1 2002 5 3 2 3 0 3 2003 10 4 6 3 1 2 2004 10 8 2 4 1 3 2005 16 12 4 4 4 0 2006 5 5 0 3 2 1 2007 10 7 3 3 2 1 2008 14 11 3 0 0 0 2009Q2 4 4 0 0 0 0

PanelC:oil-relatedsectors/oil-unrelatedsectors

Year Oil-related Oil-unrelated

Allfirms U.S. Canada Allfirms U.S. Canada

2000 6 1 5 2 2 0 2001 4 2 2 1 0 1 2002 8 3 5 0 0 0 2003 11 3 8 2 2 0 2004 12 8 4 2 1 1 2005 15 11 4 5 5 0 2006 7 6 1 1 1 0 2007 11 7 4 2 2 0 2008 8 5 3 6 6 0 2009Q2 1 1 0 3 3 0

Thecorrespondingt-statisticsmeasuringwhetherCARissignificantlydifferentfromzeroare: t(CAR)=



Var(CAR_i)/N



(5)

whereVar(CARi)isthevarianceofCARiamongNfirms.

4. Empiricalresults

4.1. Wealtheffectsofcorporatenamechangesinvolvingoil-relatedterms

Toavoidtheimpactofstaletradingontheestimationofabnormalreturns,weexcludefirmsthathavenotradingvolume fromday₋₁today+1relativetotheeventday.Wecalculateabnormalreturnsforseveneventwindows.Asillustrated inFig.1,therearemorecompaniesadding“oil”or“petroleum”totheirnamesthandeletingthemduringthehotmarket. Ifinvestorsareaffectedbycosmeticchangesincorporatenamesandmanagerstakeadvantageofinvestors’irrationality, thenweexpectthatwealtheffectsofcorporatenamechangeswouldvaryacrossdifferentmarketconditions.Therecent financialcrisismayalsohaveanimpactoninvestors’responsestocorporatenamechanges.PanelsA,B,C,andDofTable3

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015), http://dx.doi.org/10.1016/j.intfin.2015.07.003

AR

TICLE IN PRESS

AnalysisofCARsforthecombinedsampleandtwosub-samples.Thistablereportsmarket-adjustedcumulativeabnormalreturns(CARs).TheCARsarecalculatedforvariouseventperiodsforcorporatename changesassociatedwiththeword“oil”or“petroleum”fromJanuary2000toJune2009.EachcellreportstheaverageCARfortherespectiveeventperiod.Tstatisticsarereportedinparentheses.***_,**_,and*

indicatethatthecoefficientissignificantatthe1%,5%,and10%levels,respectively.PanelAshowstheresultsforthefullsampleperiod;PanelsB,C,andDshowtheresultsforthenormalmarketperiod,hot marketperiod,andthefinancialcrisisperiod,respectively.

PanelA:fullsample(fromJanuary2000toJune2009) Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Combined 107 0.0782(1.45) 0.0440(1.31) 0.0134(0.24) −0.0216(−0.29) −0.2450**_{(−2.15) 0.1006(0.92) −0.1228(−0.85)} U.S. 69 0.1333*_{(1.69) 0.0644(1.37) 0.0826(1.04) 0.0273(0.25) −0.2875}*_{(−1.73) 0.2250(1.40) −0.0899(−0.42)} Canada 38 −0.0219(−0.47) 0.0071(0.17) −0.1122*_{(−1.91) −0.1103(−1.49) −0.1677(−1.55) −0.1251(−1.36) −0.1825(−1.48)}

PanelB:normalmarketperiod(fromJanuary2000toDecember2003) Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Combined 34 0.0172(0.30) 0.0379(0.41) 0.0798(0.94) 0.0439(0.38) 0.0235(0.13) 0.0990(0.60) 0.0786(0.36) U.S. 13 0.1137(1.02) 0.1322(0.61) 0.2904(1.78) 0.2320(0.85) 0.1837(0.43) 0.4780(1.28) 0.4297(0.85) Canada 21 −0.0426(−0.68) −0.0205(−0.28) −0.0506(−0.61) −0.0725(−0.85) −0.0756(−0.60) −0.1356(−1.18) −0.1387(−0.84) PanelC:hotmarketperiod(fromJanuary2004toJune2007)

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Combined 47 0.2050***_{(2.77) 0.0697}**_{(2.04) 0.0635(0.93) 0.1881}**_{(2.07) −0.0264(−0.20) 0.4628}***_{(3.35) 0.2484(1.46)} U.S. 35 0.2470***_{(2.55) 0.0792}*_{(1.75) 0.1340(1.65) 0.2718}**_{(2.54) 0.0985(0.62) 0.5980}***_{(3.49) 0.4247}*_(2.02) Canada 12 0.0826(1.44) 0.0421(1.77) −0.1422(−1.32) −0.0562(−0.36) −0.3907*_{(−1.93) 0.0685(0.40) −0.2660(−1.28)}

PanelD:financialcrisisperiod(fromJuly2007toJune2009) Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Combined 26 −0.0713(−0.46) 0.0056(0.21) −0.1640(−1.04) −0.4862**_{(−2.60) −0.9913}***_{(−3.40) −0.5519}*_{(−2.06) −1.0570}***_(−2.85) U.S. 21 −0.0441(−0.23) −0.0024(−0.07) −0.1319(−0.68) −0.5070**_{(−2.23) −1.2227}***_{(−3.70) −0.5534}*_{(−1.68) −1.2691}***_(−2.90) Canada 5 −0.1858(−1.02) 0.0392(0.93) −0.2988**_{(−3.87) −0.3987(−1.91) −0.0193(−0.05) −0.5453}*_{(−2.41) −0.1659(−0.38)}

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

8 H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx

reporttheabnormalreturnsduringthefullsampleperiod,normaloilmarket,hotoilmarket,andthefinancialcrisisperiod, respectively.Foreachtimeperiod,wepresenttheresultsforthecombinedsample,U.S.sample,andtheCanadiansample.

PanelAofTable3showsnoevidenceofastrongmarketreactionforthefullsampleperiod.Notoneofthecombined sample,theU.S.sample,ortheCanadiansampleillustratesasignificantabnormalreturnontheeventday.Theseresultson theeventdayareconsistentwithpreviousresultsinHowe(1982),HorskyandSwyngedouw(1987),BoschandHirschey (1989)3_{,andKarpoffandRankine(1994),butareinconsistentwiththoseinLee(2000),Cooperetal.(2001),andCooper} etal.(2005).BoththecombinedsampleandtheU.S.samplehavesignificantandnegativeCARsinthe(+1,+120)window. MostCARsfortheCanadiansamplearenegative,butonlytheoneinthe(+1,+30)windowisstatisticallysignificant.

AsshowninPanelBofTable3,whenoilpriceswererelativelystable,corporatenamechangesfailedtogeneratesignificant abnormalreturns.NoCARissignificantlydifferentfromzeroacrossalleventwindowsandallsamplesduringthenormal marketperiod.

PanelCofTable3showstotallydifferentresultsforthehotoilmarketperiod.Investorsrespondedpositivelytocorporate namechangesinvolvingoil-relatedtermswhentheoilpricewassurginginthepre-crisisperiod.Forthecombinedsample andtheU.S.sample,theabnormalreturnontheeventdayissignificantlypositive(6.97%and7.92%,respectively).The positivewealtheffectcarriesovertopost-announcementperiods;CARsforthecombinedsamplearesignificantlypositive infoureventwindows.TheU.Ssampleillustratesevenstrongerandmorepersistentpositivewealtheffects.CARsfortheU.S. samplearesignificantlypositiveinfiveoutofseveneventwindows.ThepositivelysignificantCARsinthe(−15,−1)window forboththecombinedsampleandtheU.S.sampleindicateapossibleleakageofinformationbeforetheannouncementday. ThefindingsforthecombinedsampleandtheU.S.sampleduringthehotmarketperiodareconsistentwiththeinvestor maniahypothesis.

TheresultsfortheCanadiansampleduringthehotmarketperiodaresimilartothoseforthefullsampleperiod.NoCAR fortheCanadiansampleissignificantlypositive,whileasignificantandnegativeCARisfoundinthe(+1,+120)window. Thisresultiscontrarytotheconjectureofinvestorirrationalityduringanabnormalmarketcondition.Canadianinvestors donotrespondtocorporatenamechangesinvolvingoil-relatedtermsregardlessofthemarketcondition.

TheaboveresultsillustratethatU.S.investorsandCanadianinvestorsreactdifferentlytocorporatenamechanges involv-ingoil-relatedterms.InvestorsintheU.S.reactpositivelytocorporatenamechangeswhentheoilpricesurges.However, whenthefinancialcrisisexploded,theanxietytowardoverallfinancialandeconomicstabilityseemedtooutweighthe pos-itivereactiontocorporatenamechanges.EvenastheoilpricecontinuedtosurgebetweenJuly2009andJuly2008,positive marketresponsesintheU.S.marketsvanishedwhenthistimeperiodisaddedtothehotmarketperiod4_{,highlightingthe}

adverseimpactsofthefinancialcrisis.

Tofurtherassesstheimpactoftherecentfinancialcrisisonthewealtheffectsofcorporatenamechanges,weexamine themarketreactionduringthecrisisperiod(July2007toJune2009).TheresultsareshowninPanelDofTable3.

PanelDshowsnegativeandsignificantCARsinrelativelongeventwindowsforthecombinedsampleandtheU.S.sample, withCARssignificantlynegativeinfoureventwindows:(+1,+60),(+1,+120),(−15,+60),and(−15,+120).Thereareonly fivenamechangesfortheCanadianmarket,andsothesamplesizeisnotlargeenoughtodrawanymeaningfulconclusion. AstheoilpricecontinuedsurgingbetweenJuly2007andJuly2008,thepresenceofnegativeabnormalreturnsduringthe financialcrisisperiodimpliesthatoverallmarketsentimentduetothefinancialshockdominatedtheimpactofthesurging oilpriceontheoilindustry.

Asthefinancialcrisisintensified,increasingvolatilityanduncertaintymayhavewipedoutinvestors’optimismthatwas generatedbysurgingoilprices.Itisconceivablethatinvestorsexpectanyeconomichardshipcausedbythefinancialcrisis wouldinturnhurttheoilindustryandahighoilpriceisnotexpectedtobesustainable.Theoppositeeffectsofoil-related namechangesduringthehotmarketperiodandthefinancialcrisisperiodexplaintheinsignificantresultsforthefullsample period.

Attheoutsetofthefinancialcrisis,theoilpricewasstillsurging.Thus,whilethepessimisticeconomicoutlookandfuture uncertaintywerelikelytohavedriventhestockpricesofoilcompaniesdown,investors’behaviorof“flighttoquality’may havecontributedtosurgesincommodityprices,includingoil.However,unlikeothercommoditiessuchasgold,whichcan beusedasastorageofvalueandbeinvestedinfordiversificationpurposes,demandforoilisultimatelydeterminedby economicactivities.Astherecessionsetin,thenegativeforcesoutweighedthepositiveimpactof“flighttoquality”and oilstockpriceseventuallyfellduringthesecondhalfofthefinancialcrisis.Thismayexplainwhyoilpricesurgedatthe beginningofthecrisisperiod.Westilldocumentsignificantnegativeabnormalreturnsaroundoil-relatednamechanges duringtheperiodofJuly2007toJune2009.

Figs.2and3compareCARsfortheU.S.andCanadianfirmsduringthehotmarketperiodandthefinancialcrisisperiod, respectively.InFig.2,CARsfortheU.S.samplecontinuerisingafterthenamechangeannouncementday.Ontheotherhand, CARsfortheCanadiansamplescatteraroundzerooveralargeportionoftheeventwindow.AsshowninFig.3,duringthe financialcrisisperiod,CARsfortheU.S.sampleareslightlyabovezerowithinashortwindowaroundtheeventdateand

3 _{BoschandHirschey(1989)findapositivepre-announcementeffectfollowedbyanegativepost-announcementdrift.}

4 _{Tosavespace,theresultsfortheextendedhotoilmarketperiodthatincludesaportionofthefinancialcrisisperiodarenotreported.Theresultsare}

availableuponrequest.Outofthe26namechangesduringthefinancialcrisisperiod,17occurredbetweenJuly2007andJuly2008,duringwhichtheoil pricecontinuedsurging.

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx 9

Fig.2. CARchartsfromdays−15to+120ofcorporatenamechangeeffectsinthehotmarketperiod(fromJanuary2004toJune2007):U.S.versusCanada.

thenshowasignificantdownwarddrift.FortheCanadiansample,CARsneverriseabovezeroandthedownwardtrendis moreacutethanthatfortheU.S.samplewithintwomonthsaftertheannouncementday.

4.2. Additionversusdeletionofoil-relatedterms

Wenextexploretheimpactofthenatureofcorporatenamechanges.First,wecomparethewealtheffectsbetween corporatenamechangesaddinganddeletingoil-relatedterms.Theresultsforvarioussub-periodsarereportedinTable4. PanelAofTable4showsthatcompaniesaddingtheword“oil”or“petroleum”totheirnamesshowsignificantCARsof 13.5%and36.7%ineventwindows(−15,−1)and(−15,+60),respectively,forthecombinedsample.Incontrast,CARsfor companiesdeletingoil-relatedtermsaresignificantlynegativeinfoureventwindows.Addingoil-relatedtermsseemsto provideapositivesignalwhileadeletionconveysnegativeinformation.

Marketconditionshaveagreatimpactontheresults.ThesignificantandpositiveCARsforfirmsaddingoil-relatedterms existonlyduringthehotmarket,inwhichCARsaresignificantinfoureventwindowsincludingtheeventday.Noneofthe CARsduringthenormalmarketandthecrisisperiodaresignificantlydifferentfromzero.Similarly,thenegativemarket

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015), http://dx.doi.org/10.1016/j.intfin.2015.07.003

AR

TICLE IN PRESS

AnalysisofCARsofsubcategory1:additionversusdeletionofoil-relatedterms.Thistablereportsmarket-adjustedcumulativeabnormalreturns(CARs)forCategory1:firmsadding“oil”and“petroleum”totheir namesversusfirmsdeleting“oil”and“petroleum”fromtheirnames.CARsarecalculatedforvariouseventperiodsfromJanuary2000toJune2009.EachcellreportstheaverageCARacrossallfirmsforthe respectiveeventperiod.Tstatisticsarereportedinparentheses.***_,**_,and*_{indicatethatthecoefficientissignificantatthe1%,5%,and10%levels,respectively.PanelAreportstheresultsforthecombined}

sample;PanelBreportstheresultsfortheU.S.sample;andPanelCreportstheresultsfortheCanadiansample.

PanelA:combinedsample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Additions Fullsample 63 0.1350*_{(1.66) 0.0681(1.39) 0.0990(1.23) 0.1641(1.59) −0.0022(−0.02) 0.3672}**_{(2.32) 0.2009(1.07)} Normalmarket 16 −0.0196(−0.61) 0.0789(0.45) 0.1503(1.01) 0.2492(1.38) 0.3364(1.33) 0.3086(0.99) 0.3958(1.00) Hotmarket 35 0.2413**_{(2.57) 0.0844}**_{(2.03) 0.0683(0.76) 0.2482}**_{(2.11) −0.0467(−0.27) 0.5739}***_{(3.26) 0.2791(1.27)} Crisisperiod 12 0.0308(0.09) 0.0062(0.35) 0.1198(0.43) −0.1945(−0.57) −0.3241(−0.85) −0.1576(−0.32) −0.2872(−0.53) Deletions Fullsample 44 −0.0031(−0.05) 0.0096(0.23) −0.1091(−1.57) −0.2875***_{(−3.06) −0.5926}***_{(−3.18) −0.2810}**_{(−2.34) −0.5861}***_(−2.79) Normalmarket 18 0.0499(0.47) 0.0014(0.02) 0.0171(0.19) −0.1386(−0.97) −0.2546(−1.08) −0.0873(−0.62) −0.2033(−0.98) Hotmarket 12 0.0991(1.05) 0.0270(0.46) 0.0495(0.80) 0.0127(0.16) 0.0327(0.22) 0.1388(0.97) 0.1588(0.83) Crisisperiod 14 −0.1588(−1.75) 0.0051(0.10) −0.4072**_{(−2.68) −0.7362}***_{(−4.33) −1.5631}***_{(−4.14) −0.8899}***_{(−3.69) −1.7168}***_(−3.75)

PanelB:U.S.sample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Additions Fullsample 40 0.2150*_{(1.75) 0.0901(1.17) 0.2361}**_{(2.03) 0.2898}*_{(1.90) 0.0418(0.21) 0.5949}**_{(2.52) 0.3470(1.23)} Normalmarket 5 −0.0658(−1.91) 0.2074(0.35) 0.7519*_{(2.30) 0.9509}*_{(2.22) 1.0801(1.61) 1.0926(1.15) 1.2217(1.00)} Hotmarket 25 0.3059**_{(2.40) 0.1031}*_{(1.80) 0.1493}*_{(1.33) 0.3550}**_{(2.46) 0.0724(0.33) 0.7640}***_{(3.38) 0.4814(1.68)} Crisisperiod 10 0.1281(0.34) −0.0011(−0.06) 0.1951(0.59) −0.2036(−0.49) −0.5536(−1.33) −0.0766(−0.13) −0.4266(−0.68) Deletions Fullsample 29 0.0206(0.26) 0.0289(0.81) −0.1291(−1.46) −0.3348**_{(−2.68) −0.7419}***_{(−2.77) −0.2853}*_{(−1.78) −0.6924}**_(−2.32) Normalmarket 8 0.2259(1.31) 0.0852(1.57) 0.0021(0.03) −0.2173(−0.85) −0.3765(−0.80) 0.0939(0.73) −0.0654(−0.22) Hotmarket 10 0.0997(0.90) 0.0194(0.28) 0.0960(1.58) 0.0639(0.82) 0.1638(1.24) 0.1830(1.25) 0.2829(1.50) Crisisperiod 11 −0.2006(−1.78) −0.0035(−0.06) −0.4292**_{(−2.23) −0.7828}***_{(−3.86) −1.8309}***_{(−4.12) −0.9869}***_{(−3.41) −2.0350}***_(−3.77)

PanelC:Canadasample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Additions Fullsample 23 −0.0042(−0.08) 0.0298*_{(1.86) −0.1395}**_{(−2.19) −0.0545(−0.64) −0.0788(−0.55) −0.0289(−0.30) −0.0532(−0.37)} Normalmarket 11 0.0014(0.03) 0.0205(0.77) −0.1231(−1.78) −0.0697(−0.94) −0.0016(−0.01) −0.0477(−0.58) 0.0203(0.13) Hotmarket 10 0.0799(1.23) 0.0375(1.66) −0.1340(−1.04) −0.0188(−0.10) −0.3443(−1.45) 0.0986(0.52) −0.2269(−0.97) Crisisperiod 2 −0.4560(−1.01) 0.0427(0.87) −0.2570(−5.75) −0.1490(−1.09) 0.8235(1.40) −0.5623(−2.12) 0.4102(0.41) Deletions Fullsample 15 −0.0490(−0.57) −0.0278(−0.27) −0.0703(−0.61) −0.1959(−1.45) −0.3039*_{(−1.86) −0.2726(−1.56) −0.3807(−1.75)} Normalmarket 10 −0.0910(−0.73) −0.0657(−0.43) 0.0291(0.18) −0.0757(−0.46) −0.1570(−0.73) −0.2323(−1.03) −0.3137(−1.04) Hotmarket 2 0.0962(0.58) 0.0652(0.56) −0.1829(−1.27) −0.2435(−0.81) −0.6227(−1.91) −0.0821(−0.14) −0.4613(−0.76) Crisisperiod 3 −0.0057−0.15) 0.0368(0.51) −0.3267−2.42) −0.5651(−1.75) −0.5811(−1.91) −0.5340(−1.39) −0.5500(−1.51)

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx 11 responsesrelatedtothedeletionofoil-relatedtermsoccuronlyduringthecrisisperiod.CARsduringthecrisisperiodare significantlynegativeinthelastfiveeventwindows.

AsfortheU.S.firms,PanelBofTable4showsthatadding“oil”or“petroleum”tocompanynamesincursmorepositive wealtheffectsthanthecombinedsample.PositiveCARsareevidentduringallsamplingperiods,exceptforthefinancial crisisperiod.Thestrongestpositivemarketreactionisfoundduringthehotmarketperiod,inwhichCARsaresignificantly greaterthanzeroinfoureventwindows.Asmorethan71%ofthe35U.S.namechangesduringthehotmarketperiodadd oil-relatedterms,theseresultsareconsistentwiththeconjecturethatmanagerstrytobenefitfrominvestorsentimentby addingoil-relatedtermstotheircorporatenameswhentheoilmarketishot.

Duringthenormalmarket,U.S.firmsaddingoil-relatedtermstotheirnamealsoshowapositivemarketreactionwithin 2monthsaftertheeventdate.Theresultsforfirmsdeletingoil-relatedtermsareparalleltothoseforthecombinedsample. Deletionsofoil-relatedtermsareassociatedwithasignificantandnegativemarketreactionduringthefullsamplingperiod andthefinancialcrisisperiod.

TheCanadiansampleshowsnoevidenceofanysignificantmarketreactionregardlessofaddingofdeletinganoil-related term.AsshowninPanelCofTable4,forthefullsampleperiod,Canadianfirmsaddingoil-relatedtermshaveasignificant andpositiveabnormalreturnontheeventday,butitquicklyrevertsandshowsasignificantCARof_−13.95%inthe(+1,+30) window.Moreover,CARsforotherperiodsareinsignificant.Similarresultsarefoundforthedeletioncases.

ResultsinTable4suggestthattheU.S.markettreatsanadditionof“oil”or“petroleum”tocorporatenamesasamajor signal,whileadeletionof“oil”or“petroleum”fromcompanynamesconveyslessimportantinformationduringthehot marketperiod.However,therecentfinancialcrisisnullifiedthepositivewealtheffects ofaddingoil-relatedtermsand intensifiedtheadversewealtheffectsofdeletingoil-relatedterms.

4.3. Majorversusminornamechanges

Table5presentstheresultsformajorandminornamechanges.AsPanelAofTable5showsforthecombinedsample, majornamechangesyieldpositivewealtheffectsonlyduringthehotmarketperiod.Significantandpositiveabnormal returnsarefoundinthepre-announcementeventwindowandontheeventdate;thepositivewealtheffectlastsupto60 daysaftertheeventday.Bycontrast,CARsofmajornamechangesaresignificantlynegativeinfoureventwindowsduring thefinancialcrisisperiod.Investorsdonotrespondtominornamechangesacrossdifferenttimeperiods.Thesignificant CARsduringthehotmarketandthecrisisperiodssupporttheclaimthatmajornamechangesconveystrongerinformation. However,amajornamechangewasreceivedasapositivesignalwhentheoilpricesurged,butanegativesignalwhenthe financialcrisisexploded.Thisfurtherindicatesthattheoverallmarketsentimentcausedbyaforcefulshocksuchasthe recentfinancialcrisisplaysadominantroleindetermininginvestors’responsetocorporatenamechanges.

PanelBofTable5showssimilarpatternsofCARsfortheU.S.sampleasforthecombinedsample,exceptthatminorname changesintheU.S.marketalsogeneratepositiveCARsinfoureventwindowsduringthehotmarketperiod.Theresultsfor thecombinedsamplearedrivenbytheresultsoftheU.S.sample.PanelCshowsthatduringthefullsampleperiod,Canadian firmsannouncingamajornamechangehaveasignificantandpositiveabnormalreturnontheeventday,butthepositive reactionisnotsustainable.Therelativesmallsamplesizemakesithardtodrawanyconclusionforothersampleperiods. Nevertheless,thereisnosignofsignificantandpositivereturnsinmostofthecases.

4.4. Oil-relatedsectorsversusoil-unrelatedsectors

Table6presentsresultsforfirmsintheoil-related/oil-unrelatedsectors.PanelAofTable6showsthatforthecombined sample,investorsrespondpositivelytonamechangesoffirmsinoil-relatedsectorsonlyduringthehotmarketperiodin whichCARsaresignificantlypositivein4eventwindows.Noneofthecoefficientsduringthenormalperiodandthefinancial crisisperiodaresignificant.Ontheotherhand,significantandnegativeCARsarefoundforfirmsinoil-unrelatedsectors duringthefullsampleperiodandthecrisisperiod,withstrongerevidenceduringthefinancialcrisisperiod.Forfirmsinthe oil-unrelatedsector,CARsaresignificantlynegativeinfiveeventwindowsduringthecrisisperiod.

AsshowninPanelB,resultsfortheU.S.sampleareparalleltothoseofthecombinedsample.Thepositivewealtheffects forfirmsinoil-relatedsectorsarestrongandpersistentduringthehotmarketperiod.Similarly,namechangesoffirmsin oil-unrelatedsectorsleadtoanegativemarketreaction,withthenegativeresponsesmoreacuteduringthecrisisperiod. Sinceonly2Canadianfirmsthathaveoil-relatednamechangesareinoil-unrelatedsectors,theclassificationofan oil-related/oil-unrelatedsectorhasnosignificantinfluenceonpreviousresultsfortheCanadiansample.PanelCindicatesthat investorsinCanadianstocksarelargelyunresponsivetocorporatenamechangesregardlessofthenaturesofnamechanges.

4.5. Cross-sectionalanalysisofthedeterminantofcorporatenamechangeeffects

Theprecedinganalysissuggeststhatmarketsrespondfavorablytocorporatenamechangesinvolvingoil-relatedterms duringthehotmarketperiodforthecombinedsampleandtheU.S.sample.However,theaboveanalysesexaminethewealth

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015), http://dx.doi.org/10.1016/j.intfin.2015.07.003

AR

TICLE IN PRESS

AnalysisofCARsofsubcategory2:majorversusminornamechanges.Thistablereportsmarket-adjustedcumulativeabnormalreturns(CARs)forsubcategory2:majorversusminornamechanges.CARsare calculatedforvariouseventperiodsfromJanuary2000toJune2009.EachcellreportstheaverageCARacrossallfirmsfortherespectiveeventperiod.Tstatisticsarereportedinparentheses.***_,**_,and*_indicate

thatthecoefficientissignificantatthe1%,5%,and10%levels,respectively.PanelAreportstheresultsforthecombinedsample;PanelBreportstheresultsfortheU.S.sample;andPanelCreportstheresultsfor theCanadiansample.

PanelA:combinedsample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Major Fullsample 85 0.0987(1.49) 0.0654(1.69) 0.0093(0.14) −0.0681(−0.77) −0.3186(−2.38) 0.0959(0.73) −0.1545(−0.89) Normalmarket 26 0.0124(0.17) 0.0951(0.88) 0.0760(0.75) 0.0340(0.22) 0.0124(0.05) 0.1415(0.68) 0.1199(0.43) Hotmarket 35 0.2727***_{(2.92) 0.0902}*_{(1.99) 0.0749(0.90) 0.1600(1.64) −0.1029(−0.71) 0.5229}***_{(3.14) 0.2599(1.28)} Crisisperiod 24 −0.0617(−0.37) −0.0030(−0.11) −0.1586(−0.93) −0.5114**_{(−2.54) −0.9916}***_{(−3.18) −0.5761}*_{(−1.99) −1.0562}**_(−2.66) Minor Fullsample 22 −0.0009(−0.02) −0.0384(−0.60) 0.0293(0.35) 0.1582(1.27) 0.0394(0.21) 0.1189(0.77) 0.0000(0.00) Normalmarket 8 0.0328(0.39) −0.1482(−0.85) 0.0922(0.60) 0.0762(0.92) 0.0598(0.43) −0.0392(−0.20) −0.0556(−0.22) Hotmarket 12 0.0076(0.10) 0.0102(0.61) 0.0304(0.26) 0.2698(1.23) 0.1969(0.66) 0.2876(1.17) 0.2147(0.67) Crisisperiod 2 −0.1871(−1.44) 0.1088(1.55) −0.2289(−1.35) −0.1831(−1.45) −0.9876(−1.13) −0.2614(−0.80) −1.0659(−0.99)

PanelB:U.S.sample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Major Fullsample 58 0.1573*_{(1.70) 0.0741(1.33) 0.0746(0.80) −0.0465(−0.38) −0.3951}**_{(−2.12) 0.1850(1.00) −0.1637(−0.67)} Normalmarket 11 0.1130(0.85) 0.1444(0.56) 0.3460*_{(1.84) 0.2624(0.81) 0.2349(0.47) 0.5197(1.17) 0.4922(0.82)} Hotmarket 27 0.3144**_{(2.66) 0.1037}*_{(1.78) 0.1071(1.05) 0.1762(1.51) −0.0625(−0.36) 0.5943}***_{(2.87) 0.3556(1.41)} Crisisperiod 20 −0.0304(−0.15) −0.0044(−0.13) −0.1186(−0.58) −0.5169**_{(−2.16) −1.1905}***_{(−3.44) −0.5517(−1.59) −1.2254}**_(−2.67) Minor Fullsample 11 0.0068(0.07) 0.0128(0.91) 0.1247(1.41) 0.4161*(2.16) 0.2795(0.86) 0.4358*(1.83) 0.2992(0.81) Normalmarket 2 0.1180(4.85) 0.0653(1.04) −0.0148(−0.15) 0.0650**_{(20.84) −0.0979(−0.98) 0.2483(2.96) 0.0855}*_(6.78) Hotmarket 8 0.0195(0.16) −0.0035(−0.35) 0.2249**_{(2.53) 0.5946}**_{(2.55) 0.6420}*_{(2.01) 0.6106}*_{(2.08) 0.6580(1.75)} Crisisperiod 1 −0.3170 0.0386 −0.3978 −0.3096 −1.8654 −0.5880 −2.1438

PanelC:Canadasample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Major Fullsample 27 −0.0273(−0.45) 0.0465*_{(2.01) −0.1309(−2.17) −0.1146(−1.24) −0.1542(−1.14) −0.0954(−0.84) −0.1349(−0.90)} Normalmarket 15 −0.0613(−0.79) 0.0590(1.54) −0.1220(−1.50) −0.1335(−1.22) −0.1508(−0.95) −0.1359(−1.03) −0.1532(−0.78) Hotmarket 8 0.1320(1.69) 0.0443(1.53) −0.0338(−0.28) 0.1056(0.59) −0.2393(−0.93) 0.2819(1.41) −0.0630(−0.24) Crisisperiod 4 −0.2180(−0.94) 0.0042(0.14) −0.3585**_{(−5.68) −0.4842(−1.97) 0.0034(0.01) −0.6979}**_{(−3.24) −0.2104(−0.37)} Minor Fullsample 11 −0.0087(−0.14) −0.0897(−0.69) −0.0662(−0.46) −0.0997(−0.80) −0.2008(−1.09) −0.1981(−1.28) −0.2992(−1.37) Normalmarket 6 0.0044(0.04) −0.2194(−0.96) 0.1279(0.62) 0.0799(0.71) 0.1124(0.61) −0.1351(−0.54) −0.1026(−0.30) Hotmarket 4 −0.0161(−0.30) 0.0376(0.79) −0.3588(−1.92) −0.3799(−1.48) −0.6933(−2.26) −0.3584(−1.62) −0.6718*_(−2.54) Crisisperiod 1 −0.0572 0.1790 −0.0599 −0.0566 −0.1099 0.0653 0.0120

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015), http://dx.doi.org/10.1016/j.intfin.2015.07.003

AR

TICLE IN PRESS

AnalysisofCARsofsubcategory3:oil-relatedsectorsversusoil-unrelatedsectors.Thistablereportsmarket-adjustedcumulativeabnormalreturns(CARs)forsubcategory3:firmsinoil-relatedsectorsversusfirms inoil-unrelatedsectors.CARsarecalculatedforvariouseventperiodsfromJanuary2000toJune2010.EachcellreportstheaverageCARacrossallfirmsfortherespectiveeventperiod.Tstatisticsarereportedin parentheses.***_,**_,and*_{indicatethatthecoefficientissignificantatthe1%,5%,and10%levels,respectively.PanelAreportstheresultsforthecombinedsample;PanelBreportstheresultsfortheU.S.sample;}

andPanelCreportstheresultsfortheCanadiansample.

PanelA:combinedsample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Oil-related Fullsample 83 0.0529(1.12) 0.0421(1.02) 0.0874(1.58) 0.1035(1.33) −0.0332(−0.31) 0.1985*_{(1.78) 0.0618(0.44)} Normalmarket 29 −0.0155(−0.34) 0.0180(0.17) 0.0150(0.19) 0.0317(0.29) 0.1369(0.85) 0.0342(0.18) 0.1393(0.58) Hotmarket 38 0.1779**_{(2.18) 0.0716}*_{(1.97) 0.1015(1.33) 0.2548}**_{(2.53) 0.0006(0.00) 0.5043}***_{(3.44) 0.2500(1.28)} Crisisperiod 16 −0.1200(−1.10) 0.0156(0.81) 0.1853(1.04) −0.1256(−0.50) −0.4215(−1.44) −0.2300(−0.83) −0.5259(−1.64) Oil-unrelated Fullsample 24 0.1657(0.93) 0.0508(1.06) −0.2425(−1.62) −0.4542**_{(−2.60) −0.9776}***_{(−3.13) −0.2377(−0.81) −0.7610}*_(−1.87) Normalmarket 5 0.2071(0.67) 0.1531(1.99) 0.4555(1.33) 0.1146(0.22) −0.6340(−0.83) 0.4749(1.88) −0.2737(−0.51) Hotmarket 9 0.3195(1.79) 0.0621(0.64) −0.0967(−0.65) −0.0939(−0.48) −0.1403(−0.51) 0.2878(0.74) 0.2413(0.67) Crisisperiod 10 0.0066(0.02) −0.0104(−0.16) −0.7228***_{(−3.67) −1.0630}***_{(−6.57) −1.9029}***_{(−3.91) −1.0668}*_{(−2.07) −1.9067}**_(−2.48)

PanelB:U.S.sample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Oil-related Fullsample 47 0.1077(1.45) 0.0721(1.11) 0.2350***_{(2.90) 0.2653}**_{(2.21) 0.0239(0.14) 0.4451}**_{(2.55) 0.2037(0.90)} Normalmarket 9 0.0165(0.47) 0.1052(0.33) 0.1914(1.29) 0.3164(1.09) 0.4697(1.04) 0.4381(0.82) 0.5914(0.84) Hotmarket 27 0.2188*_{(1.95) 0.0884}*_{(1.76) 0.1801}*_{(1.88) 0.3570}***_{(2.92) 0.1312(0.69) 0.6641}***_{(3.58) 0.4383}*_(1.74) Crisisperiod 11 −0.0901(−0.64) 0.0049(0.23) 0.4054(1.77) −0.0015(0.00) −0.6043(−1.60) −0.0868(−0.22) −0.6895(−1.63) Oil-unrelated Fullsample 22 0.1879(0.97) 0.0479(0.92) −0.2430(−1.51) −0.4812**_{(−2.58) −0.9529}**_{(−2.79) −0.2453(−0.76) −0.7170(−1.62)} Normalmarket 4 0.3326(0.92) 0.1929(2.27) 0.5134(1.18) 0.0422(0.06) −0.4599(−0.48) 0.5677(1.87) 0.0657(0.12) Hotmarket 8 0.3422(1.70) 0.0483(0.44) −0.0215(−0.15) −0.0156(−0.08) −0.0118(−0.04) 0.3750(0.87) 0.3787(1.00) Crisisperiod 10 0.0066(0.02) −0.0104(−0.16) −0.7228***_{(−3.67) −1.0630*}**_{(−6.57) −1.9029}***_{(−3.91) −1.0668}*_{(−2.07) −1.9067}**_(−2.48)

PanelC:Canadasample

Eventperiod 1 2 3 4 5 6 7 Subcategory N −15to−1 0 +1to+30 +1to+60 +1to+120 −15to+60 −15to+120 Oil-related Fullsample 36 −0.0187(−0.39) 0.0029(0.07) −0.1053(−1.78) −0.1077(−1.44) −0.1076(−1.02) −0.1235(−1.28) −0.1235(−1.02) Normalmarket 20 −0.0299(−0.46) −0.0213(−0.28) −0.0644(−0.74) −0.0964(−1.11) −0.0129(−0.11) −0.1476(−1.23) −0.0641(−0.41) Hotmarket 11 0.0776(1.24) 0.0303(1.34) −0.0916(−0.88) 0.0041(0.03) −0.3200(−1.54) 0.1120(0.61) −0.2121(−0.96) Crisisperiod 5 −0.1858(−1.02) 0.0392(0.93) −0.2988**_{(−3.87) −0.3987(−1.91) −0.0193(−0.05) −0.5453}*_{(−2.41) −0.1659(−0.38)} Oil-unrelated Fullsample 2 −0.0785(−0.36) 0.0831(0.93) −0.2370(−0.51) −0.1580(−0.28) −1.2492**_{(−15.39) −0.1534(−0.60) −1.2446(−3.22)} Normalmarket 1 −0.2949 −0.0060 0.2241 0.4043 −1.3303 0.1034 −1.6312 Hotmarket 1 0.1380 0.1721 −0.6981 −0.7202 −1.1680 −0.4101 −0.8579 Crisisperiod 0

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015),

http://dx.doi.org/10.1016/j.intfin.2015.07.003

ARTICLE IN PRESS

INTFIN-821; No.ofPages20

14 H.-M.Linetal./Int.Fin.Markets,Inst.andMoneyxxx(2015)xxx–xxx

effectsofdifferenttypesofnamechangesoneatatimeanddonotcontrolforotherpossibledeterminingfactors.Toaddress this,werunthefollowingregressionstotestthedeterminantsofabnormalreturnsofvariouseventperiods:

CAR0=ˇ0+ˇ1Dc+ˇ2D1+ˇ3D2+ˇ4D3+ˇ5DP+ˇ6AVR0+ˇ7LMV0+ε0 (6A)

CAR_(−15,+60)=ˇ0+ˇ1Dc+ˇ2D1+ˇ3D2+ˇ4D3+ˇ5DP+ˇ6AVR0+ˇ7LMV0+ε0 (6B)

CAR(−15,+120)=ˇ0+ˇ1Dc+ˇ2D1+ˇ3D2+ˇ4D3+ˇ5DP+ˇ6AVR0+ˇ7LMV0+ε0. (6C)

Thedependentvariablesaretheabnormalreturnsontheannouncementday(CAR0)andcumulativeabnormalreturns

fortheeventwindows(_−15,+60)and(_−15,+120).Here,Dcequals1forU.S.firmsand0forCanadianfirms.D1equals1

fornamechangesthataddtheword“oil”or“petroleum”and0fordeletingoil-relatedterms.D2equals1formajorname

changesand0forminornamechanges.D3equals1forfirmsinoil-relatedsectorsand0forfirmsinoil-unrelatedsectors.

Dpequals1fornamechangesduringthepre-crisisperiodand0forchangesduringthefinancialcrisisperiod.AVR0isthe

abnormalvolumeratioontheeventday.AVR0equalsthetradingvolumeofafirmontheeventdaydividedbytheaverage

volumeofthefirm’stradingvolumeovertheperiodfromday−100today−16.LMV0isthenaturallogarithmoftheequity

marketvalueontheeventday.WealsoestimatetheaboveregressionsfortheU.S.andCanadianmarketsseparatelywithout thedummyvariable,Dc.Intotal,nineregressionmodelsareestimated:threeforthecombinedsamplewithDc,threefor

theU.S.sample,andthreefortheCanadiansample.

Table7liststheregressionresults.Models1,2,and3presenttheresultsforabnormalreturnsontheeventdate(CAR0).

Mostofthecoefficientsoftheindependentvariablesareinsignificantwithafewexceptions.Forthecombinedsampleand theU.S.sample,abnormaltradingvolume(AVR0)issignificantlyandnegativelyassociatedwithCAR0.However,noneof

thedummyvariablesareabletoexplainthevolatilityoftheabnormalreturnsontheannouncementday.Theseresultsare consistentwithourpreviousfindinginTable3inthatabnormalreturnsontheeventdayforthecombinedsamplearenot significantlydifferentfromzero.Thelackofsignificantabnormalreturnsontheeventdateexplainsourinsignificantresults ofModel1throughModel3.

Model4showsasignificantandpositivecoefficientonDc,indicatingthattheannouncementeffectsofrelevantname

changesfortheeventwindow(−15,+60)intheU.S.aresignificantlyhigherthanthoseinCanada.Thissupportsourprevious findingthatinvestorsinCanadianstocksarelessresponsivetooil-relatednamechangescomparedtothoseintheU.S.The coefficientsofD1ofModels4and5indicatethataddinganoil-relatedtermtoacorporatenamehasapositiveimpact

onCAR(−15,+60).Aftercontrollingforotherfactors,westillfindthattheadditionofoil-relatedtermsgeneratesalarger

wealtheffectthanthedeletionofoil-relatedtermsforthecombinedsampleandtheU.Ssample.However,thecategoryof major/minorandoil-related/oil-unrelatedsectorscannotexplainthevariationofthewealtheffects.FortheCanadiansample (Model6),noneofthecoefficientsofthedummyvariablesfornamechangescharacteristicsaresignificant.ForModels4,5, and6,thecoefficientsofDpareallsignificantlypositive,reinforcingthepreviousfindingthatpositivemarketreactionsare

foundonlyforthepre-crisisperiod.ThisfindingisconsistentwiththeresultsinTable3.ThecoefficientsofAVR0andLMV0

areinsignificant.

Models7,8,and9presenttheresultsforCAR(−15,+120),whicharesimilartothoseforCAR(−15,+60)(Models4–6).Significant

andpositiveimpactsofaddingoil-relatedtermsandforthepre-crisisperiodonCARsarefoundforthecombinedsample andtheU.S.sample.FortheCanadiansample,mostofthecoefficientsofindependentvariablesareinsignificant.These resultsareconsistentwiththefindingsinprevioustables—thatis,investorsinCanadianstocksarelargelyunresponsiveto oil-relatednamechangesregardlessofthenatureofnamechangesandthelengthofeventwindows.

5. Discussion

Wefinddifferentwealtheffectsofoil-relatednamechangesfortheU.S.andCanadianmarkets.Thissectiondiscusses possiblereasonsforthedifferences.PreviousstudiesdocumentthreemajordifferencesbetweentheU.S.andCanadianequity markets:(1)Canadianequitymarketsaredominatedbyresourcefirms,especiallyoilandgasfirms;(2)Canadianmarkets arelessliquidthanU.S.markets;and(3)stockownershipismoreconcentratedinCanadathanintheU.S.Webelievethese characteristicsmaypartiallyexplaindifferentmarketreactionstocorporatenamechangesinvolvingoil-relatedterms.

TheoilandgasindustryplaysadominantroleinCanada’seconomyandequitymarkets.Nicholls(2006)reportsthatoil andgascompaniesaccountfor27%intotalmarketcapitalizationand11%inthenumberoffirmslistedontheTorontoStock Exchange(TSX).IntheTSXVentureExchange,oilandgascompaniesaccountfor25%intotalmarketcapitalizationand13% inthenumberoffirmslisted.Investorfamiliarityandextensivemediacoverageabouttheoilandgasindustrymayexplain whyinvestorsdonotreactenthusiasticallytocosmeticoil-relatedcorporatenamechanges.

During1980,infrequenttradingwasamajorproblemintheCanadianequitymarkets.Itwasreportedthatonly4.3% ofstockslistedonTSEtradedonthelastdayofeachmonth,and58%hadnotradesforatleastonemonth.Weexpect investorsinarelativelyilliquidmarketwillbelessresponsivetonewinformation.Anilliquidmarketischaracterizedby highertransactioncosts,whichhinderpromptresponsestonewinformation.Therefore,itisnotsurprisingtofindthat investorsinCanadianstocksarelessresponsivetooil-relatednamechangescomparedtothoseintheU.S.markets,which arehighlyliquidandinvestorstradeactivelyonthearrivalofnewinformation.

Stockownershipalsoaffectsthewealtheffectsofcorporatenamechanges.Previousstudies(RaoandLee-Sing,1995; MorckandStangeland,1994)reportthatstockownershipishighlyconcentratedinCanada.Inparticular,oneorasmallgroup

Please cite this article in press as: Lin, H.-M., et al., The wealth effects of oil-related name changes on stock prices: Evidence from the U.S. and Canadian stock markets. J. Int. Financ. Markets Inst. Money (2015), http://dx.doi.org/10.1016/j.intfin.2015.07.003

AR

TICLE IN PRESS

Cross-sectionalregressionsofCAR.Thistablereportsresultsoffollowingregression:CAR=ˇ0+ˇ1Dc+ˇ2D1+ˇ3D2+ˇ4D3+ˇ5Dp+ˇ6AVR0+ˇ7LMV0+ε.ThedependentvariableisCAR0,orCAR(−15.+60)orCAR(−15,+120)

forcompaniesthatundergoanamechangeinvolvinganoil-relatedterm.Dcequals1fortheU.S.firmsand0forCanadianfirms.D1equals1fornamechangesthataddtheword“oil”or“petroleum”and0for

deletingthem.D2equals1formajornamechangesand0forminornamechanges.D3equals1forfirmsinoil-relatedsectorsand0forfirmsinoil-unrelatedsectors.Dpequals1forchangesfromJanuary2000to

June2007and0otherwise.AVR0istheabnormalvolumeratioontheeventday,whichiscalculatedinsectionD.LMV0isthenaturallogarithmoftheequitymarketvalueontheeventday.Eachcellreportsthe

averageabnormalvolumeacrossallfirmsfortherespectiveeventwindows.Tstatisticsarereportedinparentheses.***_,**_,and*_{indicatethatthecoefficientissignificantatthe1%,5%,and10%levels,respectively.} Variable Model1

(Combinedsample) CAR0

Model2(U.S.)CAR0 Model3(Canada)

CAR0 Model4(Combined sample)CAR(−15,+60) Model5(U.S.) CAR(−15,+60) Model6(Canada) CAR(−15,+60) Model7(Combined sample)CAR(−15,+120) Model8(U.S.) CAR(−15,+120 Model9(Canada) CAR(−15,+120) Intercept −0.0503(−0.44) −0.0546(−0.35) −0.0700(−0.29) −0.8540**_{(−2.37) −0.8700(−1.63) −1.1328}**_{(−2.21) −1.7689}***_{(−3.75) −1.9260}***_{(−2.78) −1.7722}**_(−2.57) Dc 0.0992(1.42) 0.6006**(2.69) 0.4593(1.57) D1 0.0763(1.08) 0.0853(0.82) 0.0708(0.81) 0.5082**(2.33) 0.7165**(2.15) 0.2279(1.23) 0.6156**(2.17) 0.8823**(2.05) 0.3196(1.29) D2 0.1315(1.65) 0.1155(0.95) 0.1714*(1.73) 0.0187(0.07) −0.0767(−0.18) 0.1340(0.64) −0.0045(−0.01) −0.0289(−0.05) 0.0206(0.07) D3 −0.0172(−0.19) −0.0163(−0.15) −0.1397(−0.74) 0.2837(1.05) 0.2168(0.61) −0.0134(−0.03) 0.4376(1.25) 0.1895(0.42) 0.9937*(1.85) DP 0.0840(1.07) 0.1468(1.45) 0.0311(0.23) 0.8442***(3.45) 0.9609***(2.89) 0.7155**(2.43) 1.1099***(3.47) 1.4308***(3.29) 0.2236(0.56) AVR0 −0.0003***(−4.64) −0.0003***(−4.38) 0.0014(1.48) −0.0002(−0.80) −0.0002(−0.86) 0.0032(1.54) −0.0001(−0.46) −0.0002(−0.55) 0.0012(0.44) LMV0 −0.0139(−1.14) −0.0276(−1.61) −0.0022(−0.12) 0.0036(0.10) −0.0199(−0.38) 0.0431(1.09) 0.1077**(2.29) 0.0979(1.48) 0.0814(1.52) AdjR2 _{0.2304 0.3010 0.1459 0.2252 0.2438 0.2294 0.2252 0.2840 0.2242} N 93 56 31 99 62 31 99 62 31