A Rose.com by Any Other Name

Authors

  • Michael J. Cooper,

  • Orlin Dimitrov,

  • P. Raghavendra Rau


  • * Cooper, Dimitrov, and Rau are from the Department of Finance, Krannert School of Management, Purdue University. We would like to thank Kent Daniel, Diane Denis, Dave Denis, Roberto Gutierrez, Ken French, and seminar participants at the Duke/University of North Carolina's Behavioral Finance/Bicycle Mini-Conference, Tilburg University, the 2000 European Financial Management Association meetings, the 2000 European Finance Association meetings, the 2000 Financial Management Association meetings, and the 2000 Berkeley Program in Finance for their helpful comments. We are especially thankful to an anonymous referee and to the editor, René Stulz, for many helpful suggestions that have greatly improved this paper.

ABSTRACT

We document a striking positive stock price reaction to the announcement of corporate name changes to Internet-related dotcom names. This “dotcom” effect produces cumulative abnormal returns on the order of 74 percent for the 10 days surrounding the announcement day. The effect does not appear to be transitory; there is no evidence of a postannouncement negative drift. The announcement day effect is also similar across all firms, regardless of the firm's level of involvement with the Internet. A mere association with the Internet seems enough to provide a firm with a large and permanent value increase.

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