ORIGINAL EMPIRICAL RESEARCH
Identity change vs. strategy change: the effects of rebranding
announcements on stock returns
&Roger J. Calantone
&Clay M. Voorhees
Received: 26 February 2017 /Accepted: 15 February 2018
#Academy of Marketing Science 2018
Firm rebranding efforts are inevitable; however, we have a limited understanding of the nature and performance implications of
those rebranding decisions. This research contributes to our understanding of this process by identifying two fundamental
dimensions of rebranding decisions: brand identity change and brand strategy change. More importantly, we identify and
empirically test the conditions under which brand identity change and brand strategy change have either strong or weak (even
negative) influences on firm value. Specifically, the results from analyzing 215 rebranding announcements suggest that (1)
rebranding decisions, on average, are associated with positive abnormal stock returns in the (−5, +5) event window, and (2)
investors use cues, like the fit among rebranding dimensions, firm competitive position, and industry competitive intensity, to
make informed evaluations of firm future cash flows.
Keywords Corporate rebranding .abnormal return .competition .brand identity change .brand strategy change
Branding and brand management are cornerstones of modern
marketing strategy as strong brands trigger customer loyalty
and profits (Keller 2000;Ouetal.2017; Vomberg et al.
2015). Given the importance of branding in practice, academic
literature has strived to inform the extent to which brands can
serve as assets and be managed as such. For example, the
Journal of the Academy of Marketing Science has published
multiple special issues on brands, including corporate branding
and identity (Dacin and Brown 2006) and the relationship
between brands and innovation (Brexendorf et al. 2015).
These academic investigations support the idea that brands
are an important source of competitive advantage and that cer-
tain brand management practices (e.g., new brand introduc-
tions, brand extensions, brand architecture, and brand disposal)
can significantly affect shareholder value (Hsu et al. 2016;
Madden et al. 2006; Varadarajan et al. 2006; Wiles et al. 2012).
Despite this power, however, brands do not exist in a silo.
External environments are constantly evolving, resulting in
new competitors and shifts in customers’needs. Given the
dynamic nature of the environment in which brands compete,
brands that fail to adapt can quickly become outdated and fail to
sustain their desired competitive advantage (Gotsi and
Andriopoulos 2007; Roy and Sarkar 2015). As such, firms
often resort to rebranding campaigns to reinvent a brand and
facilitate growth, choosing to update the brand’s identity and/or
strategy (Bolhuis et al. 2015; Lambkin and Muzellec 2008).
For example, Domino’s Pizza (July 2014), Verizon
(September 2015), Alaska Airlines (January 2016), and
Coach Inc. (October 2017) are examples of companies that
have recently launched rebranding campaigns. In an extreme
example, Long Island Iced Tea Corp. rebranded itself as Long
Blockchain Corp. on December 11, 2017, to reflect the shift of
strategic focus to the bitcoin business, and its stock price rose
by as much as 289%.
From an academic perspective, a few investigations have
examined the potential effects of simple brand name changes
Raji Srinivasan served as Area Editor for this article.
Roger J. Calantone
Clay M. Voorhees
College of Business Administration, University of Nebraska at
Omaha, Mammel Hall 134M, 6708 Pine Street, Omaha, NE 68182,
Eli Broad Graduate School of Business, Michigan State University,
East Lansing, MI 48824, USA
Culverhouse College of Commerce, The University of Alabama,
Tuscaloosa, AL 35487, USA
Journal of the Academy of Marketing Science
(e.g., Kalaignanam and Bahadir 2013; Kashmiri and Mahajan
2015;Tsaietal.2015), but a comprehensive view of the ef-
fects of rebranding remains unexplored. We therefore seek to
extend the extant studies and provide the most comprehensive
examination of the effects of rebranding efforts on firm value
and, in doing so, make three core contributions to the market-
ing literature. First, this research is the first of its kind to
consider rebranding efforts as being multifaceted and com-
posed of both brand identity change and brand strategy revi-
sion. While brand identity change means changes in the cor-
porate name or visual identity elements (logo, color, or slo-
gan), brand strategy change refers to changes in brand prom-
ises or positioning, value proposition, or targeted customers.
Prior research has traditionally concentrated on the influence
of brand name changes (a high degree of brand identity
change), while the financial influences of visual identity
change and brand strategy revision have been understudied
thus far. We conduct the first investigation to split these two
dimensions and demonstrate that rebranding projects can be
viewed as existing on a two-dimensional continuum.
Second, we examine the relevance of rebranding to finan-
cial metrics and firm performance. It remains unclear whether
rebranding positively or negatively influences firm perfor-
mance. On the one hand, rebranding is touted as a positive
signal and an effective means of building renewed brand as-
sociations and an updated brand image (Bolhuis et al. 2015).
Thus, it has a positive impact on firm performance (Muzellec
and Lambkin 2006;Tsaietal.2015). On the other hand,
rebranding campaigns carry the risk of losing or blurring the
original, favorable brand associations, which may lead to neg-
ative impacts on firm performance (Gotsi and Andriopoulos
2007;Lee2013). This tangled relationship between
rebranding and firm performance poses considerable chal-
lenges for marketing practitioners. To help provide answers,
we thus offer initial insights into the impact of rebranding on
Finally, we examine two key contingencies that can impact
the effectiveness of brand identity and strategy changes.
Specifically, we demonstrate that rebranding dimensions have
differential effects under varying competitive conditions. The
results of these contingencies can help firms better understand
the impact their rebranding efforts will have on short-term
firm value, which can help inform the initial rebranding deci-
sion and its implementation.
Ultimately, by examining 215 rebranding announcements,
we demonstrate that rebranding campaigns, on average, are
associatedwith a 2.46% increase in stock prices in the (−5, +5)
event window. We also find that investor reactions to a
rebranding announcement are not uniform, noting that more
than 40% of the announcements in our sample were followed
by negative abnormal returns. The results of the contingency
assessments reveal that when a firm faces intense competition
or lags behind others in the industry, rebranding efforts must
include strategic changes to experience positive abnormal
returns. We also find that investors react more favorably to
substantial brand identity changes (i.e., corporate name
change) in a less competitive industry.
In the following sections, we provide a brief review of the
rebranding literature and a theoretical basis for the effects
examined. Then, we review the data, analysis, and results of
the model testing. Finally, we discuss our findings and the
theoretical and managerial implications.
Rebranding and its dimensions
While most investigations of rebranding have focused on sim-
ple brand identity changes, such as a corporate name change, a
few consumer-focused studies suggest that rebranding efforts
are indeed multifaceted. Specifically, Muzellec and Lambkin
(2006) state that Brebranding can be described along a contin-
uum …depending on the degree of change along two dimen-
sions: marketing positioning and visual aesthetics^(p. 819).
Similarly, Lomax and Mador (2006) propose a matrix-based
typology of rebranding choices that reflects Bthe interplay be-
tween a change of name and a change of values^(p. 91).
However, scant research has empirically tested the multi-
dimensional nature of rebranding.
Given this multi-dimensional view of rebranding efforts,
Muzellec and Lambkin (2006) define rebranding as the
Bcreation of a new name, term, symbol, design, or a combina-
tion of them for an established brand with the intention of
developing a differentiated (new) position in the minds of
stakeholders and competitors^(p. 805). This definition first
suggests that rebranding initiatives involve changes in corpo-
rate name and/or visual elements (symbol, design, logo, etc.),
which are different forms of brand identity (Koku 1997;
Bolhuis et al. 2015). Moreover, this definition suggests that
rebranding efforts to some degree strive to develop or rein-
force a new market position for the brand. The positioning
efforts are usually accomplished by changing brand strategy,
which can include targeting new customers, updating the val-
ue proposition, and renewing brand promises (Muzellec et al.
2003; Muzellec and Lambkin 2006). Hence, we posit that
rebranding has two fundamental dimensions: brand identity
change and brand strategy change.
Brand identity change Brand identity changes include any
revisions to a brand’s name or visual elements (symbol, de-
sign, logo, etc.) (Koku 1997; Roy and Sarkar 2015). Brand
name and visual element changes are on the opposite ends of a
single continuum, with visual changes being more minor and
name changes representing more major identity changes.
Most of the prior scholarly interest has centered on the
J. of the Acad. Mark. Sci.
performance implications of brand name changes (Horsky and
Swyngedouw 1987;Ing2012; Kalaignanam and Bahadir
2013; Kashmiri and Mahajan 2015;Koku1997), which has
been considered as a revolutionary or extreme identity change
(Ing 2012; Muzellec and Lambkin 2006; Muzellec and
Lambkin 2007). On the other hand, visual element changes
have been referred to as evolutionary changes that reflect a
low degree of identity change and the effects of these types of
changes have been largely overlooked in the literature. This
oversight is surprising, given that these visual elements con-
stitute a firm’s visual equity that plays a role as important as
the corporate name (Bolhuis et al. 2015; Bottomley and Doyle
2006; Machado et al. 2012; Balmer 2008). In addition to iden-
tity changes, it is possible that firms also update their brand
strategy in parallel during a rebranding effort, which we dis-
Brand strategy change A brand is not merely a name or a
logo; it is also about Bvalues and promises, attitudes and
feelings^(Daly and Moloney 2004, p. 35). The objective of
rebranding is usually to strengthen a current position or to
reposition a brand in the minds of their target customers,
which is accomplished through brand strategy change, includ-
ing revising the brand positioning, redefining brand values
and promises, updating brand architecture, and targeting
new customers (Muzellec et al. 2003; Muzellec and
Lambkin 2006). Even though prior rebranding research has
not directly modeled brand strategy change or its effects, it has
implied that brand strategy change is an inseparable aspect of
rebranding (e.g., Horsky and Swyngedouw 1987;Koku1997;
Muzellec and Lambkin 2006). While brand strategy changes
are often accompanied by identity changes, it is possible that
the degree of change on each of these elements can signifi-
cantly vary and have differential effects on the returns associ-
ated with rebranding efforts.
Rebranding and signaling theory
Signaling theory was introduced by Spence (1973)toaddress
the problem of information asymmetry in a situation of quality
uncertainty. Since its introduction, signaling theory has been
leveraged toexplain the impact that firmstrategies have on the
market through the signals that they transmit. For example,
Prabhu and Stewart (2001) suggest that marketing actions
contain information about a firm’s abilities, which can serve
as quality signals to the market. That being said, not all mar-
keting actions provide effective signals. For a marketing ac-
tion to be deemed a credible signal, the action must involve
significant costs and commitment (Park and Mezias 2005;
Spence 1973). In the context of this research, a rebranding
announcement qualifies as a market signal, because it usually
involves significant financial costs (e.g., BP reportedly spent
£136 million on a rebranding campaign) and represents a
firm’s serious commitment to change its brand identity and/
or brand strategy.
According to signaling theory, when signaling costs (e.g.,
monetary costs, loss of reputation) are high, firms are unlikely
to send false signals (Srivastava and Lurie 2004). Signaling a
significant brand identity change is associated with high sig-
naling costs, which include the sunk costs of abandoning the
existing brand identity and the new costs of promoting a new
brand identity. Signaling significant brand strategy change can
also be costly and risky. Sending a false repositioning signal
may obscure a brand’s position in stakeholders’minds, lead-
ing to the error of Bconfused positioning.^Additionally, fail-
ing to deliver on the brand identity change and brand strategy
change as promised may damage a firm’s reputation and cred-
ibility. Therefore, we believe that firms refrain from sending
false rebranding signals and attempt to amplify the effects of
these signals through announcements.
A rebranding announcement signals to stakeholders that a
firm is embarking on changing its quality or the way it con-
ducts business (Koku 1997; Lane and Jacobson 1995). This
announcement is intended to reduce information asymmetry,
as a firm’s stakeholders are purportedly more informed about
the firm’s plans for future growth and profitability (Certo et al.
2001). For example, Spacehab, Inc. changed its name to
Astrotech Corporation to signal the changes being made to
the company’s mission, vision, and business focus. Such a
signal conveys that the rebranding project will help the brand
build a differentiated position in its customers’minds and thus
enhances the shareholders’confidence in the eventual success
of the rebranding effort (Koku 1997;Muzellecetal.2003;
Park and Mezias 2005).
Leveraging signaling theory to explain the effects of
rebranding is common in the marketing literature.
Specifically, building on signaling theory, Horsky and
Swyngedouw (1987), Kalaignanam and Bahadir (2013),
Kashmiri and Mahajan (2015), Lee (2001), and Rani and
Asija (2017) all find that corporate name changes reduce the
discrepancy between brand identity and brand image and in-
fluence investors’perceptions of a firm’s future profitability,
thus driving stock market returns up in the short term. Thus,
while a litany of research (see Table 1) has suggested that the
announcement of a name change can serve as a credible mar-
ket signal, less is known about the extent to which the dimen-
sions associated with rebranding efforts can influence the
magnitude of these returns.
The effect of rebranding on shareholder value
This research examines the effect of rebranding efforts on
future shareholder value by extending prior studies that
J. of the Acad. Mark. Sci.
Table 1 Empirical research on the effects of rebranding
Authors Sample and Method Dimension(s) Examined Key Findings
Studies relating rebranding to firm performance
Horsky and Swyngedouw
58 name changes; event study Identity (name) change Name changes improve firm performance, especially firms Bthat produce industrial
and whose performance prior to the change was relatively poor^(p. 320).
Koku (1997) 28 name changes; trend analysis Identity (name) change Investors react more positively to name changes that are announced simultaneously
with other managerial decisions.
Lee (2001)114B.com^name changes; event study Identity (name) change The announcements of ‘.com’name change result in Bsignificant increases in stock
prices and trading activity.^(p. 793)
Hanson et al. (2009) 95 hotels; secondary data Identity (name) change BHotels that merely changed brands without also changing their scale reported no
change in financial results^(p. 360).
Kalaignanam and Bahadir
105 name changes; event study Identity (name) change Investor reactions are more favorable when corporate name change and business
restructuring occur simultaneously.
Kashmiri and Mahajan (2015) 180 name changes; event study Identity (name) change Advertising and marketing capability and CMO presence significantly influence the
stock market reaction to name changes.
Tsai et al. (2015) 260 hotels; secondary data Identity (name) change Hotel rebranding (name change) results in a 6.31% increase in occupancy rates.
Rani and Asija (2017) 41 name changes; event study Identity (name) change Corporate name change is associated with a positive average abnormal return. Market
risk and historical profitability are predictors of the abnormal return.
Agnihotri and Bhattacharya
415 name changes; event study Identity (name) change Indian investors react positively to corporate name change announcements.
Studies relating rebranding to
Muzellec and Lambkin (2006) 166 rebranded companies; cases Unspecified Rebranding helps build favorable brand associations and thus positively influences
M’Sallem et al. (2009) 383 customer surveys Identity (name) change Corporate name change does not significantly change consumers’evaluation
(brand attitudes, customer satisfaction) of a brand.
Plewa et al. (2011) 264 club members surveys Unspecified Rebranding generates Bincreased membership value and satisfaction, leading to
greater commitment to the organization.^(p. 236)
Ing (2012)138 consumer surveys Identity (name) change The influence of rebranding on customer attitude is more significant for familiar
brands than for unfamiliar ones.
Machado et al. (2012) 467 customers of 6 banks;
Identity (name and logo)
Customers show positive reactions (e.g., brand preference) to rebranding projects
subsequent to a brand merger.
Tev i (2013) 141 customers of a Nigerian
Unspecified Rebranding does not significantly affect customer attitudes towards the rebranded
Roy and Sarkar (2015) Two experiments Identity (name and logo)
Rebranding news diminishes an established brand’s customer-based brand equity
but enhances a less-established brand’s brand equity.
Bolhuis et al. (Bolhuis et al.
329 employee surveys and 442 consumer
Visual identity change Brand visual identity change results in increases in the perceived modernity,
and distinctiveness of brand image.
J. of the Acad. Mark. Sci.
investigate the role of corporate name changes as market sig-
nals to a broader set of rebranding efforts. Signaling theory
suggests that financial markets assess the extent to which
newly announced marketing actions, such as rebranding ef-
forts, foreshadow a change in that firm’s prospective cash
flows (Agrawal and Kamakura 1995). In this context of
rebranding, prior research has found that brand name changes
have a positive effect on stock market returns. This is because
brand name changes, which carry substantial signaling costs,
are perceived by various stakeholders as a positive signal that
reduces the discrepancy between brand identity and brand
image (Horsky and Swyngedouw 1987;Lee2001).
Corporate name changes can also be used to signal improved
product standards and value, thus resulting in positive stock
market reactions (Koku 1997). We posit that the tenets of
signaling theory can be extended and applied to rebranding
Rebranding announcements communicate a firm’snew
brand identity and/or new brand strategy to its stakeholders.
Such communication, which bears significant signaling costs,
reduces information asymmetry between a firm and its stake-
holders (Lambkin and Muzellec 2010). This triggers investors
to gauge current stock prices and react, often resulting in a
change in the firm’s shareholder value, even before the brand
changes occur. The magnitude of investors’reactions to mar-
keting actions, like rebranding efforts, are largely determined
by the forecasted impact of those marketing actions on cus-
tomers (Horsky and Swyngedouw 1987; Lane and Jacobson
1995; Wiles and Danielova 2009). Given that (1) rebranding
activities influence customer-based brand equity (Gotsi and
Andriopoulos 2007;Lee2013) and that (2) customer-based
brand equity, as a market-based asset, influences firm value
(Srivastava et al. 1998), it is likely that there is a connection
between rebranding decisions and firm value change.
Srivastava et al. (1998) suggest that market-based assets
can affect shareholder value by Baccelerating and enhancing
cash flows, lowering volatility and vulnerability of cash flows,
and increasing the residual value of cash flows^(p. 2). Given
that rebranding decisions signal a firm’s efforts to build new
customer-based brand equity, which is an important form of
relational market-based assets (Roy and Sarkar 2015;
Srivastava et al. 1998), we argue that rebranding campaigns,
on average, have positive implications for a firm’sfuturecash
flows. Specifically, refreshed brand identity and improved
brand strategy collectively enhance relationships between a
firm and its customers. Such signals help customers better
understand the firm and should ultimately result in increased
customer demand and customer loyalty (Machado et al.
2012), thereby increasing cash flow levels. Moreover,
rebranding accelerates firm cash flow timing, because it sig-
nals renewed brand associations and facilitates a firm’sadjust-
ment to marketplace challenges and opportunities in a timely
manner (Muzellec and Lambkin 2006; Roy and Sarkar 2015).
In addition to increased cash flows, an updated brand identity
and brand strategy will increase a firm’s ability to adjust to
internal and external contingencies and thus reduce its vulner-
ability to unforeseeable uncertainties (Machado et al. 2012).
Finally, rebranding increases a firm’s residual value by pro-
viding access to new customer segments, thereby bringing in
additional firm revenue. Although differing in their underly-
ing premises, signaling theory and brand equity literature both
predict that investors will develop positive expectations of a
firm’s future financial performance due to its rebranding.
Thus, the following hypothesis is offered:
H1: Corporate rebranding is associated with positive abnor-
The moderating role of competitive factors
Since brands are often viewed as a firm asset and a source of
competitive advantage (Varadarajan et al. 2006; Vomberg
et al. 2015), an outdated brand identity and brand strategy
can undermine a firm’s competitive advantage (Stuart and
Muzellec 2004). Rebranding initiatives are usually undertaken
for the purpose of rebuilding that competitive advantage
(Petburikul 2009; Stuart and Muzellec 2004). In this study,
we specifically focus on the strategic fit between rebranding
dimensions and competitive factors, suggesting that the effec-
tiveness of rebranding efforts is contingent on the competitive
environment. In this research, we consider two competitive
factors: firm competitive position and industry competitive
intensity. By applying the Bfit as moderation^perspective
from industry organization theory (Venkatraman 1989), we
propose a Bcompetition × rebranding →performance^rela-
tionship wherein we explore how interactions between
rebranding dimensions and competitive factors affect share-
holder value. The hypotheses underlying these interactions are
Investors react more favorably to marketing signals and
actions associated with higher necessity and justification than
to those with lower levels of these aspects (Balasubramanian
et al. 2005). When reacting to a rebranding announcement,
investors assess not only the information and signals released,
but also the rationale behind them (Stuart and Muzellec 2004).
Because rebranding is associated with significant costs (e.g.,
the loss of brand equity and the marketing costs of rebuilding
the new brand identity) and risks (e.g., customers’reactions to
the new brand identity are unknown), the signal indicating
brand identity change and brand strategy change must be well
justified (Stuart and Muzellec 2004; Tevi 2013). Reactions
from shareholders are more favorable if these shareholders
regard the rebranding signal as justified, necessary, and im-
portant for generating positive future cash flows. Therefore,
shareholders may combine the rebranding signal and firm-
J. of the Acad. Mark. Sci.
level and industry-level information to rationalize the neces-
sity of rebranding.
From an investors’point of view, a deteriorating firm com-
petitive position should provide the necessary justification for
a high degree of change in identity and/or strategy and for the
higher costs and risks associated with such changes. When a
firm’s competitive position suffers, shareholders mandate sig-
nals of change, and the firm is obligated to signal that strategic
redirection or adaptation (Friedman and Singh 1989). A high
degree of brand identity change or brand strategy change com-
municates the signal for strategic redirection, because it rep-
resents a firm’s commitment to rebuild its brand associations
and become more competitive (Koku 1997).
Changes in the brand identity or strategy made by a firm in
a worsening competitive position send a positive signal that
the firm is fulfilling its obligation to make adaptations for its
shareholders’interests. Hence, shareholders of a firm facing
the erosion of competitive position will not only recognize the
necessity of brand identity and/or strategy change but also
very likely welcome such changes when that rebranding in-
formation is publicly released (Horsky and Swyngedouw
1987; Singh et al. 2012). Investors will reward a firm that
faces a weak competitive position for signaling efforts to sig-
nificantly change brand identity and brand strategy.
In contrast, when a firm is in a favorable competitive posi-
tion, shareholders’need for a signal of strategic change is
relatively low (Friedman and Singh 1989). Instead, they have
mandates for signaling strategic continuity and consistency
(Friedman and Singh 1989). Thus, they may not reward a firm
for signaling high brand identity and/or strategy change. Thus,
we hypothesize the following:
H2: Firm competitive position negatively interacts with (a)
the degree of brand identity change and (b) the degree of
brand strategy change to affect abnormal returns.
The same rationale should apply to the interaction between
rebranding dimensions and industry competitive intensity.
The fit between firm strategic choices and market structure
influences firm performance (Child 1972,1997). Prior re-
search has found that the industry environment influences
shareholders’evaluation of market signals (e.g., Madhavan
and Prescott 1995). Muzellec et al. (2003) state that
rebranding, like other strategic decisions, involves identifying
and leveraging the fit between the firm and its environment.
The role played by signals in reducing information asymmetry
is especially important in a competitive, uncertain, and chang-
ing environment (Clark et al. 2002; Sanders and Boivie 2004).
Rebranding is a signal that reduces shareholders’uncertainty
about firm quality, and such a signaling role is especially sa-
lient when industry environments are both competitive and
uncertain (Kaikati and Kaikati 2003; Sanders and Boivie
2004; Zhang and Wiersema 2009).
Customer-based brand equity can easily erode in a compet-
itive industry because a large number of firms compete for
brand awareness and loyalty (Lee 2013;Muzellecand
Lambkin 2006; Shocker et al. 1994). Changing brand identity
and/or brand strategy enables a firm to regain market recog-
nition and reputation and rebuild brand equity (Horsky and
Swyngedouw 1987). Firms need this newly rebuilt brand eq-
uity to deter uncertainty in a highly competitive industry.
Hence, a signal of brand identity and strategy changes will
increase investors’confidence in the firm’sability to deter
competition, maintain competitive advantage, and secure con-
sistent future cash flows. Investors will recognize the necessi-
ty and justification of changes as cued by industry competition
and will welcome those changes, and in turn, they will reward
firms in a competitive industry for conveying such a signal
(Singh et al. 2012). Hence, we expect that the market reactions
to rebranding efforts depend on the fit between brand identity
and/or brand strategy change and industry competitive inten-
sity. Thus, we offer the following hypothesis:
H3: Industry competitive intensity positively interacts with
(a) the degree of brand identity change and (b) the de-
gree of brand strategy change to affect abnormal returns.
Rebranding announcements To develop the dataset to test the
research propositions, we began by searching for the an-
nouncements of rebranding campaigns in the major daily
newspapers (e.g., Wall Street Journal,New York Times)and
on wire services (e.g., Business Wire, PR Newswire). Our
sampling frame consisted of rebranding statements announced
by publicly traded firms across 20 years (1996 to 2015). We
limited our sample to publicly traded firms, because we were
interested in verifiable financial returns related to these
rebranding announcements. However, we did not restrict the
industries we sampled. The key words for this searching in-
cluded Brebrand,^Brename,^Breposition,^Bname change,^
Blogo change,^Bnew name,^Bnew logo,^and Bnew brand
identity.^One author and a research assistant carefully
scanned more than 2000 announcements and identified 229
rebranding announcements. For an announcement to be qual-
ified as a rebranding announcement, it either had Brebranding^
in its title or text or explicitly stated that the announcements
were related to updates of the firm’s brand identity (e.g., brand
name, logo) and/or brand strategy (e.g., brand positioning,
brand value, and brand promises). Moreover, an announce-
ment was not recognized as a rebranding announcement un-
less both raters agreed on its qualifications.
J. of the Acad. Mark. Sci.
Following standard procedure recommended by the prior
research (e.g., Boyd and Spekman 2008;Boydetal.2010), we
searched the SEC’s EDGAR and press releases to identify any
ancillary events that might have confounding effects on stock
prices. We removed 14 rebranding announcements when a
second event (e.g., the release offinancial reports, the appoint-
ment of a CEO, and/or the launch of new products or new
brands) was observed during a three-day window surrounding
the event date. The final sample consisted of 215 rebranding
projects across 101 industries. Several rounds of painstaking
searches were then conducted to retrieve the earliestdate when
the rebranding information was revealed to the public. These
data showed that the rebranding projects were announced by
all types of firms, ranging from large firms (assets > $10
billion) to small firms (assets <10 million), and included both
new firms (age< 10 years) and old firms (age > 100 years).
Abnormal stock returns Once the rebranding events were
identified, we accumulated data on abnormal stock returns (a
change in firm value) associated with these announcements.
Abnormal returns are an unbiased estimate of firm value
change and are calculated as the difference between the
and its expected (estimated) returns
rit (Brown and Warner 1980). We chose 255 trading days
(300 days to 46 days before an event) as the estimation win-
dow, consistent with prior research (e.g., Wiles and Danielova
2009). The estimation window was used to obtain ordinary
least squares parameter estimates, which were then used to
calculate the expected returns ^
rit (Boyd et al. 2010). Fama
and French’s(1996) momentum four-factor model (also re-
ferred to as the Carhart (1997) model) was used to calculate
abnormal returns across different time windows surrounding
an event. We computed cumulative abnormal returns (CARs)
for each event by summing the daily abnormal returns across
different time windows to account for the influence of infor-
mation leakage (before the announcement day) and the influ-
ence of information dissemination (after the announcement
Brand identity change Brand identity change was measured
by the degree of changes in brand identity-related elements,
such as brand names, logos, colors, and slogans. The degree of
change in brand identity for each rebranding project was rated
on a scale of 1 to 10, with 1 indicating the lowest degree of
brand identity change and 10 indicating the highest. We used1
instead of 0 as the lower limit because brand identity change
was a criterion we applied to identify actual rebranding pro-
jects. One author and a research assistant rated the degree of
brand identity change associated with each rebranding project.
To evaluate the extent to which the two raters agreed with each
other (the reliability and consistency of responses between
these two raters), we computed the intra-class correlation co-
efficient (ICC). Shrout and Fleiss (1979) provide guidelines
for choosing among six types of ICC. ICC1 is appropriate
when Bthere is a consistent number or set of raters for all the
ratees^(Wei et al. 2014, p. 60), which was the case in this
research. In our study, the ICC1 of this measure was 0.88,
which is considered very high (Bliese 2000). The coding
criteria are shown in Fig. 1.
In order to develop a single score for brand identity change,
we had to balance the extensiveness of both a brand name
change and a visual identity change in the coding process. In
the coding process, we identified 106 cases of brand visual
identity change without an accompanying brand name
change. Brand visual identity change (without a name change)
is often considered a low degree of brand identity change
(Muzellec and Lambkin 2006). Thus, if a rebranding project
only involved visual identity changes (without a name
change), we assigned it a score ranging from 1 to 6. We
allowed a range for these scores, because some visual identity
changes are more significant than others (Daly and Moloney
2004). For example, Microsoft underwent a significant
rebranding event in 2012 in which the firm made dramatic
changes to every visual identity element within the brand.
However, Facebook’s logo change in 2015 was more modest,
considering that only slight changes were made to the logo. To
ensure an objective measure of brand visual identity change,
we first developed a checklist consisting of six important vi-
sual elements: logo typeface, logo colors, logo shape, logo
elements arrangement, slogan, and overall image (Bottomley
and Doyle 2006; Doyle and Bottomley 2004). Each
rebranding event was then evaluated by the two raters using
the checklist, and the number of items checked was used to
indicate the degree of change made to the brand’svisual
Brand name changes represent more substantial revi-
sions to a brand identity (Muzellec and Lambkin 2006),
and in our sample 109 cases involved a name change.
Given the substantial nature of a brand name change, we
assigned a score ranging from 5 to 10 for each brand
name change. We allowed a 1-point overlap between the
two criteria, because there were cases in which the name
change was minor (e.g., Polo Ralph Lauren changing to
Ralph Lauren) or the marketing aesthetic changes were
rather significant (Microsoft’s logo change). When mea-
suring brand name change, Horsky and Swyngedouw
(1987) subjectively judged whether a name change was
radical or not based on Bwhether a new name included a
substantial and recognizable portion of the old name^(p.
329). Our coding criteria expanded on the idea presented
by Horsky and Swyngedouw (1987). In our coding, a
score of 5 or 6 was used to indicate a minor difference
between the new name and the old name, 7 or 8 to indi-
cate a moderate difference, and 9 or 10 to indicate a
J. of the Acad. Mark. Sci.
substantial difference. More specific details in this regard
are displayed in Fig. 1.
Brand strategy change The degree of brand strategy change
was operationalized as the magnitude of the modifications
or improvements to a firm’s brand strategy as stated in a
rebranding announcement. Raters read each announcement
carefully and subjectively rated it on a scale of 0 to 10 to
indicate the extent to which the firm had attempted to
change or update its brand strategy through the rebranding
project. We used 0 instead of 1 as the lower limit because
some rebranding announcements did not mention changes
in brand strategy. The specific coding criteria that were
appliedaredisplayedinTable2. The development of the
coding criteria is based on the notion that signaling signif-
icant brand strategy change is associated with high signal-
We used the coding criteria to evaluate the extent to which
a rebranding announcement provides new and specific infor-
mation about a brand’s strategic redirection. Signaling a new
brand strategy carries the potential cost of losing upfront in-
vestments in brand building activities (sunk brand invest-
ments). The specificity of the brand strategy change informa-
tion imposes constraints on a firm’s branding behavior, which
reduces the probability of defaulting on the promises (Sorescu
et al. 2007). Our coding revealed that minor brand strategy
changes occurred in 39 rebranding projects, moderate changes
occurred in 107, and major changes happened in 69. We again
computed the ICC1 to examine the consistency of responses
between the two raters, and ICC1 was 0.69, which again is
considered very high (Bliese 2000).
Firm competitive position Relative market share is a market-
ing metric used by a firm to compare its market share to its
largest competitor in the industry. Research has suggested that
relative market share is a better indicator of competitive
position than absolute market share (Anselmi 2000;
Dussauge et al. 2004; Hansen and Wernerfelt 1989).
Relative market share is also preferred over absolute market
share when data is collected across product categories or in-
dustries (Anselmi 2000; Pechmann and Stewart 1991;
Varadarajan and Dillon 1982). Because maintaining and
gaining market share is a primary goal of marketing competi-
tion, we used the change in relative market share as a proxy for
change in the competitive position. Change in relative market
share was computed as the difference between the relative
market share two years prior to the rebranding and the share
one year prior to rebranding.
Industry competitive intensity Consistent with prior research,
we measured industry competition using an entropy measure
(Jacquemin and Berry 1979),
is the market share of firm iin a 4-digit Standard
Industry Classification (SIC) code.
Control variables In addition to the focal variables in our con-
ceptual model, firm restructuring, brand identity age, firm age,
firm size, and customer type may also influence investors’
expectations about a firm’s future financial performance and
should be included in the estimation as controls. Firm
restructuring was coded as B1″if structural changes (e.g.,
M&As, spin-offs, divestment) were mentioned in a rebranding
announcement and B0″if not. Brand identity age was the
number of years from the time a brand identity element was
introduced to its being changed. Such information was ac-
quired from Compustat (if a name change) or USPTO (if a
logo change). Firm age was the number of years from firm
establishment to its rebranding, based on the information
Brand Name Chan
Visual Identity Change
01234 5678 910
Minor name change
(coded as a 5 or 6):
when the new name
includes a substantial
portion of the old
name. Example: Polo
Ralph Lauren Ralph
Moderate name change
(coded as a 7 or 8): when
the new name stems from
the firm’s existing or
acquired brands and thus,
it has some prior brand
equity attached. Example:
Radical name change
(coded as a 9 or 10):
when the new name is
a truly new name
without any prior
brand equity attached.
An announcement is
not identified as a
rebranding event when
there is no change in
the brand identity.
The number of visual elements that did
change in the following list:
logo typeface (font)
logo elements arrangement
Visual Identity Change Examples
Fig. 1 Coding criteria for the
degree of brand identity change
J. of the Acad. Mark. Sci.
obtained from Gale Directory Library and MarketLine
Advantage. Firm size was computed as log(total assets).
Customer type was coded as B1″if the main buyers of a firm’s
products or services were organizational buyers and B0″if
consumers, based on the information obtained from the firm
websites, Gale Directory Library, and MarketLine Advantage.
Abnormal returns associated with rebranding
The average abnormal returns and test statistics for various
event windows (time frames) surrounding the rebranding an-
nouncement date are shown in Table 3. To estimate the impact
of rebranding on firm value change (H1), we examined wheth-
er cumulative abnormal returns for the event windows sur-
rounding the rebranding announcement date were significant-
ly different from zero. The results from both time series stan-
dard deviation tests and generalized sign Z values suggested
that the cumulative abnormal returns in various event win-
dows were significantly larger than 0, and the effect was ro-
bust across different event windows. This result indicates that
rebranding announcements are associated with significantly
positive stock returns. Consistent with the prior research
(e.g., Boyd et al. 2010;Raassensetal.2012), we chose the
event window with the most significant abnormal returns (i.e.,
the −5-day to +5-day window). In the (−5, +5) event window,
we observed an average increase of 2.46% in stock prices (t =
3.29, p< 0.05), which corresponded to an average gain of $31
million in market value for the sampled firms.The generalized
sign statistic (Z) provided support for the robustness of the
positive abnormal returns (Z = 3.19, p< 0.05, 126 positive
vs. 89 negative). On the event day (Day 0), 120 out of 215
(i.e., 56%) abnormal returns were positive. All of the above
results lend strong support to H1.
Tab le 4provides the correlation matrix and descriptive
statistics for all the variables. Positive correlation existed
between CAR(−5, +5) and firm restructuring (r = 0.21,
p< 0.05). This positive correlation is consistent with find-
ings from the strategic management literature that indicate
that firm structural changes, such as M&As, are associat-
ed with positive stock returns (Capron and Pistre 2002;
Datta et al. 1992). CAR(−5, +5) was negatively correlated
with brand identity age (r = −0.16, p< 0.05), firm age (r =
−0.17, p< 0.05), and firm size (r = −0.27, p< 0.05). These
negative correlations imply that investors may penalize a
longstanding large firm for abandoning a long-existing
brand identity. These preliminary findings are consistent
with both the existing theory and the conventional
wisdom, thus enhancing our confidence in our sample.
CAR(−5, +5) was positively associated with brand iden-
tity change (r = 0.21, p< 0.05) and brand strategy change
Table 2 Coding criteria for the degree of brand strategy change
Strategy Change Operationalization Counts
Minor (0–3) A firm does not or barely mention any ongoing or planned changes to its brand strategy.
Since barely any strategy change is announced, we have to use brand identity change to
infer possible strategy change, based on the assumption that more significant brand strategy
changes usually follow a brand name change rather than a visual identity change.
0 It announces minor visual changes, but barely any strategy change. 2
1 It announces major visual changes, but barely any strategy change. 3
2 It announces a minor name change, but barely any strategy change. 11
3 It announces a major name change, but barely any strategy change. 23
Moderate (4–6) A rebranding project is undertaken to reflect previous or ongoing changes within or
outside the firm. The tone of the announcement is centered on the Bcurrent^or the Bpast^.
A firm usually states that the rebranding initiative is conducted to reemphasize current
positioning, react to current competition, or to improve the value offered to current customers…
4…However, not enough information about the plan or goal is provided. 37
5…And some information about the plan or goal is provided. 41
6…And very detailed information (e.g., marketing plan) about the plan or goal is provided. 29
Major (7–10) A rebranding project is undertaken to signal a departure from a previous brand strategy.
Thus, the tone is centered on the Bfuture^. A firm usually states that it is rebranding to
signify its new positioning or a new market entry….
7…However, not enough information about the plan or goal is provided. 40
8…And some information about the plan or goal is provided. 21
9…And detailed information about the plan or goal is provided. 5
10 …And very detailed information about the plan or goal is provided. 3
J. of the Acad. Mark. Sci.
(r = 0.17, p< 0.05), indicating that the two dimensions of
rebranding may influence investors’evaluation of the
worth of rebranding.
Firm restructuring was positively associated with brand
identity change (r = 0.30, p< 0.05) and brand strategy
change (r = 0.25, p< 0.05). This finding is consistent with
the qualitative finding in prior research that indicates that
firm structural change is a key driver of any firm
rebranding decision (e.g., Muzellec and Lambkin 2006).
Firm size was negatively correlated with brand identity
change (r = −0.28, p< 0.05) and brand strategy change
(r = −0.20, p< 0.05), which confirmed the conventional
wisdom that large firms are more reluctant (or less flexi-
ble) to change their brand identity and brand strategy.
These correlations provided additional ex post support
for the validity of the criteria applied to coding brand
identity change and brand strategy change.
In addition, the correlation between brand identity
change and brand strategy change was 0.33, which was
lower than the upper threshold (r = 0.50) for low correla-
tion conditions (Grewal et al. 2004; Voorhees et al.
2016). An additional crosstab analysis demonstrated that
52 rebranding projects were featured by low identity
change but high strategy change, while 33 were featured
by high identity change but low strategy change. These
indicators show that high (low) brand strategy change is
not always a companion of a high (low) brand identity
change, and thus, they support our contention that brand
identity change and brand strategy are distinct dimen-
sions of rebranding.
Abnormal returns model results
To test H2 and H3, we estimated a multiple regression model
with CAR(−5, +5) as the dependent variable (Table 5,Model
1). When determining the significance of coefficients, we ob-
tained clustered robust standard errors, which relaxed the as-
sumption of independence among the errors and allowed for
correlation at the industry level. Model 1 explained a reason-
able amount of the variance in abnormal returns (R
The proportion of explained variance in abnormal returns was
also in line with other event studies in the marketing literature
(e.g., Sorescu et al. 2007). Among the controls, brand identity
age diminished abnormal returns to rebranding (β=−0.10,
p< 0.05). Consistent with the theory, this finding suggests that
investors penalize firms for abandoning longstanding brand
identities (jeopardizing their longstanding brand equity).
The main effects of brand identity change (β= 0.08,
p> 0.05) and brand strategy change (β=0.11, p>0.05) on
abnormal returns were not statistically significant, which
was not too surprising, as we expected these effects to be
contingent on the competitive environment. In line with this
logic, we found strong support for the idea that the abnormal
returns are contingent on the fit between rebranding dimen-
sions and competitive factors. Although the interaction be-
tween the degree of brand identity change and firm competi-
tive position was not significant (β=0.01, p> 0.05; H2a is
not supported), the interaction between brand strategy change
and firm competitive position was significant and with the
expected sign (β=−0.06, p< 0.05; H2b is supported). To bet-
ter understand the pattern of interactions, we calculated the
Table 3 Abnormal returns and
test statistics across various event
Time Series Standard
-5 0.03 101:114 0.12 −0.22
−4 0.22 116:99 0.98 1.83
−3−0.06 106:109 −0.28 0.46
−2 0.12 109:106 0.55 0.87
−1 0.55 113:102 2.46
00.59 120:95 2.62
1−0.14 100:115 −0.60 −0.34
2 0.42 108:107 1.86
3 0.01 107:108 0.04 0.60
4 0.55 111:104 2.42
50.16 99:116 0.73 −0.49
(−5, +5) 2.46 126:89 3.29
(−3, +3) 1.50 119:96 2.51
(−1, +1) 1.01 111:104 2.59
(−1, +3) 1.44 113:102 2.85
(−3, +5) 2.21 120:95 3.27
Statistically significant at the 0.05 level
Statistically significant at the 0.1 level
J. of the Acad. Mark. Sci.
predictive margins using different combinations of rebranding
dimensionsand competitive factors and plotted them in Fig. 2.
Even though not statistically significant, the interaction be-
tween brand identity change and firm competitive position
was also plotted and illustrated in Panel A. The interaction
between brand strategy change and firm competitive position
is illustrated in Panel B, which shows that initiating a high
degree of brand strategy change is especially important for
firms in an unfavorable competitive position, because brand
strategy changes produce a more significant difference on the
stock returns of those in an unfavorable competitive position
(CARs = 3.18% vs. -0.27%) thanfor those ina favorable com-
petitive position (CARs = 3.37% vs. 2.09%).
We hypothesized a positive interaction between brand
identity change and industry competition intensity in H3a.
Contrary to our prediction, the interaction was significant
but with an opposite sign (β=−0.19, p< 0.05). This result
suggests that investors react less favorably to a high degree
of brand identity change in a highly competitive industry.
Figure 2Panel C illustrates the predicted margins of the inter-
action between brand identity change and industry competi-
tive intensity. In a highly competitive environment,
rebranding projects that have a low degree of brand identity
change create higher firm value than those with a high degree
of brand identity change (CARs = 5.15% vs. 1.05%).
However, in a less competitive environment, rebranding pro-
jects with a high degree of brand identity change (i.e., corpo-
rate name change) create significantly higher value than those
with a low degree of brand identity change (i.e., visual identity
change; CARs = 3.82% vs. -0.73%).
Consistent with our prediction in H3b, we found that the
abnormal returns were positively related to the interaction
between brand strategy change and industry competition
(β=0.18,p< 0.05). This result indicates that investors reward
a high degree of brand strategy change in highly competitive
environments. Panel D of Fig. 2illustrates the predicted effect
of the interaction between brand strategy change and industry
competitive intensity on abnormal returns. In a highly com-
petitive environment, rebranding projects with a high degree
of brand strategy change create significantly higher sharehold-
er value than those with a low degree of brand strategy change
(CARs = 5.73% vs. 1.35%). However, in a less competitive
environment, rebranding projects with a low degree of brand
strategy change can create higher value than those with a high
degree of brand strategy change (CARs = 3.07% vs. -0.85%).
Robustness checks Several robustness checks were performed
on our results. First, we re-estimated our models using an
alternative measure of industry competition (Herfindahl-
Hirschmann index, computed as the sum of squares of market
shares at the 4-digit SIC level). The magnitudes and signs of
most of the coefficients remained unchanged. Second, consid-
ering that brand identity change and brand strategy change
might be endogenous, we also estimated a path model with
competitive factors and other variables as predictors of
rebranding dimensions. These results showed that the inclu-
sion of predictors of rebranding dimensions did not change the
magnitudes or signs of most of the coefficients. Finally, we
used an alternative expected return model (i.e., market model)
to calculate abnormal returns, and that model generated almost
identical results to the Fama-French-Momentum Model
(Table 5, Model 2).
Long-term stock returns To test whether a long-term stock
return was associated with rebranding efforts, we calculated
two-year buy-and-hold abnormal returns (BHARs). BHAR is
the difference between the compounded returns of an event
firm and its benchmark (non-event firms with the same size,
book-to-market ratio, and SIC industry classification; Barber
and Lyon 1997). The elimination of confounded events is
Table 4 Correlations and descriptive statistics
Mean S.D. 1 2 3 4 5 6 7 8 9
 CAR(−5, +5) 2.46 11.41
 Brand Identity Change 5.85 2.71 0.21
 Brand Strategy Change 5.10 1.95 0.17
 Firm Competitive Position 0.00 0.03 0.05 −0.03 −0.07
 Industry Competitive Intensity 2.36 1.04 0.04 0.10 0.11 −0.03
 Firm Restructuring 0.27 0.44 0.21
 Brand Identity Age 14.22 13.19 −0.16
0.06 0.04 −0.10 −0.15
 Firm Age 41.10 36.51 −0.17
−0.05 −0.06 −0.14
 Firm Size 7.24 2.22 −0.27
0.08 0.02 −0.17
 Customer Type 0.58 0.49 0.12
0.07 0.04 0.20
Statistically significant at the 0.05 level
Statistically significant at the 0.1 level
J. of the Acad. Mark. Sci.
unnecessary when estimating long-term returns (Sorescu et al.
2007; Sorescu et al. 2017). Therefore, we calculated BHAR
using the full sample. The results showed that the two-year
average BHAR after rebranding announcements was not sta-
tistically significant (mean = −7.91%, SD = 69.09%, and
p> 0.05). However, a large variance in BHAR is observed:
128 rebranding projects were associated with negative BHAR,
while 79 were associated with positive BHAR.
These results suggest that, in the long term, investors
quickly update their expectations of future cash flows and
adjust the price they are willing to pay for the stock (Boyd
et al. 2010;SwaminathanandMoorman2009). A significant
Table 5 Abnormal returns model
results Cumulative Abnormal Returns
Market Model Equally
Brand Identity Change 0.08 0.09
Brand Strategy Change 0.11 0.09
Firm Competitive Position 0.06 0.08
Industry Competition Intensity 0.01 0.02
H2a: Identity × Competitive Position 0.01 0.02
H2b: Strategy × Competitive Position −0.06
H3a: Identity × Competitive Intensity −0.19
H3b: Strategy × Competitive Intensity 0.18
Restructuring 0.09 0.09
Brand Identity Age −0.10
Firm Age −0.04 −0.01
Firm Size −0.17 −0.19
Customer Type 0.00 0.00
Significant levels were calculated based on cluster-robust standard errors which were adjusted for 101 clusters in
the 4-digit SIC
Statistically significant at the 0.01 level
Statistically significant at the 0.05 level
AIdentity Change × Competitive Position (H2a) B
Strategy Change × Competitive Position (H2b)
Change × Competitive Intensity (H3a Identity Strategy Change × Competitive Intensity (H3b)
Predicted Abnormal Returns
Low Identity Change High Identity Change
Favorable Competitive Position
Predicted Abnormal Returns
Low Strategy Change High Strategy Change
Low Competitive Intensity High Competitive Intensity
Predicted Abnormal Returns
Low Identity Change High Identity Change
Predicted Abnormal Returns
Low Strategy Change High Strategy Change
Fig. 2 Interactions between
rebranding dimensions and
J. of the Acad. Mark. Sci.
CAR(−5, +5) suggests a positive net present value of
rebranding efforts. However, as rebranding projects are imple-
mented and other actions are taken, investors will update their
expectations over time. The non-significant two-year BHAR
may suggest either (1) that the implementation of rebranding
failed to meet investors’expectations or (2) that other firm
actions diminished the long-term effect of the rebranding ef-
forts (Boyd et al. 2010; Swaminathan and Moorman 2009).
We retested our model using BHAR as the dependent variable.
None of these hypothesized effects were significant.
Prior research on rebranding issues has suggested that both
benefits and risks are involved in rebranding initiatives. This
contention is confirmed in our event study. Even though this
study revealed a 2.46% increase in stock prices (CAR(−5,
+5)) due to rebranding announcements, we found that investor
reactions to rebranding announcements were not uniform, as
89 out of 215 announcements in our sample were followed by
negative abnormal returns. In light of this practical rebranding
concern, this research focused on answering a central research
question of both managerial and theoretical importance:
Given the benefits and risks of rebranding, how can firms
better design rebranding programs to maximize abnormal
returns associated with their rebranding projects? To answer
this question, we first identified two distinct dimensions of
rebranding—brand identity change and brand strategy
change—as the key design features of rebranding projects.
Building on the signaling theory, we then proposed a research
model that specifies the relationships among the competitive
factors (firm competitive position and industry competitive
intensity), two dimensions of rebranding, and shareholder val-
ue. Finally, we empirically tested this model on a sample of
215 rebranding announcements, and the results provide strong
support for the proposed model by showing that competitive
factors interact with the rebranding dimensions to affect share-
Even though rebranding announcements, on average, are
associated with positive abnormal returns, these returns are
contingent on the extent to which the rebranding efforts in-
clude identity and strategy changes and the fit of these strate-
gies with the competitive environment. These interactions
(brand strategy change × firm competitive position, brand
strategy change × industry competitive intensity, and brand
identity change × industry competitive intensity) explained
the substantial variance in abnormal returns. These findings
further demonstrate that the financial worth of rebranding pro-
jects may not be derived from the individual dimensions of
rebranding, but rather from the fit between these rebranding
dimensions and competitive factors. Investors appear to react
favorably to rebranding projects that involve good fit and less
favorably when there is a misfit.
With respect to fit, the results suggest that changes to brand
strategy have stronger effects when the competitive position is
unfavorable or when competitive intensity is high. Brand
strategy changes signify a firm’s efforts to revitalize its brand
value, renew brand promises, re-target new customers, and
deter competition. Given the aggressive nature of these chang-
es, it appears that investors view brand strategy changes as a
strong signal or marketing investment to overcome competi-
tive pressures, and these strong signals are rewarded by inves-
tors. Alternatively, when competitive intensity is high, a high
degree of brand identity change (i.e., corporate name change)
is perceived as a negative signal, and CARs decrease. In these
situations, firms might view brand name changes as being too
risky and as a means to expose a firm further to competitive
threats, thus resulting in investors only rewarding brand iden-
tity changes when competitive intensity is low.
Given these results, firms could better calibrate their
rebranding strategies or certainly their rebranding announce-
ments to send the ideal signals to investors. In the following
sections, we highlight the specific theoretical and managerial
implications of the research.
Considering that scant empirical research has been performed
on rebranding, we have a limited understanding of the even-
tual performance consequences of rebranding decisions. The
current effort contributes to this nascent research stream in
many ways. First, this work brings insights and clarity to the
nature of rebranding and can serve as a foundation for future
research on this topic. To the best of our knowledge, our work
is the first to examine the two distinct dimensions of
rebranding empirically. Prior research on rebranding has pre-
dominantly centered on corporate name changes. Brand visual
identity changes and brand strategy changes have been miss-
ing from these previous empirical investigations. Our results
demonstrate that brand identity change and brand strategy
change are both important dimensions of rebranding and can
have very different impacts on shareholder value. As these
two dimensions can be viewed as the design features of
rebranding projects, we thereby provide a more nuanced un-
derstanding of the formulation and design of rebranding
Second, using signaling theory as the main theoretical lens,
we provide empirical insights into the signaling role
rebranding plays. Abnormal returns from rebranding are de-
rived from the resolution of information asymmetry about
firm growth and profitability. While prior research has recog-
nized the signaling role of corporate name changes, we exam-
ine the signaling role of a broader set of rebranding efforts,
including visual identity change and brand strategy change.
J. of the Acad. Mark. Sci.
More importantly, we provide additional support to previous
findings that the signaling role played by strategic actions is
substantially dependent on market conditions (Park and
Mezias 2005; Robertson et al. 1995; Sanders and Boivie
2004). This current work underscores the significant role
played by the interaction between rebranding dimensions
and competitive factors in influencing abnormal stock returns.
Although rebranding decisions are perceived by investors as a
favorable signal (positive and significant CARs), investor re-
actions are not uniform. Abnormal returns were negative in
more than 40% of the cases in our sample. Thus, it is impor-
tant for researchers to identify the specific market conditions
under which rebranding signifies either higher or lower firm
future cash flows. We did find evidence that investors interpret
the information conveyed in rebranding announcements and
do evaluate whether such information (or signal) fits the firm’s
specific competitive position and the industry’scompetitive
Finally, this research contributes to the burgeoning market-
ing literature on the financial returns of brand investments.
The value of marketing investments, or the contribution of
marketing activities to a firm’s financial performance, has
been a major research priority for marketing scholars
(Marketing Science Institute 2014). Different forms of mar-
keting investments in brand management, such as brand ex-
tensions, new brand introductions, and brand acquisitions,
have received extensive scholarly attention over the past few
decades. These brand management investments contribute to a
firm’s financial performance by enhancing firm-to-firm or
firm-to-customer relationships (Gruca and Rego 2005; Wiles
et al. 2012). However, research on rebranding is still relatively
sparse. Part of the reason for this, we believe, is the lack of
empirical research on the relevance of rebranding for firm
performance. This current research presents empirical evi-
dence that stock prices are indeed informed by rebranding
activities. Investors recognize and evaluate the signals carried
forth in rebranding announcements. Our research broadly sug-
gests that rebranding campaigns are associated with firm per-
formance and thus, this finding can inspire valuable future
research in this area.
We offer noteworthy implications for contemporary market-
ing practice. First, by studying the differential effect of two
rebrandingdimensions, we provide much-needed insights into
the design features of rebranding projects and thus have cru-
cial implications for firms that decide to rebrand. The degree
of brand identity change and the degree of brand strategy
change are two variables that top executives and brand man-
agers can fully control. However, our results also highlight the
real difficulties in choosing the appropriate level of identity
change and strategy change and encourage managers to
consider the degree of fit between rebranding dimensions
and competitive factors. Managers can use Fig. 2as a decision
matrix and use cues such as the firm’s competitive position
and the industry’s competitive intensity to make more in-
Specifically, Fig. 2shows that a high degree of brand iden-
tity change (i.e., corporate name change) does not seem to be
an effective feature of rebranding initiatives when the
rebranding firm is in a highly competitive industry. When
faced with intense competition, a firm should refrain from
changing its corporate brand name during the rebranding pro-
cess, as keeping the core brand identity element intact helps
preserve the firm’s competitive edge. Such firms should limit
their rebranding efforts to simply updating their brand visual
identity elements, such as their brand logo or slogan.
Furthermore, we show that investor reactions to corporate
name changes are more favorable when the rebranding firms
are in a less competitive industry. A high degree of brand
strategy change seems to be an effective design feature except
when the rebranding firm is in a less competitive industry.
When faced with weak competition, it appears that investors
view aggressive brand strategy changes as an ineffective de-
ployment of resources, and thus the CAR(−5, +5) decreases.
On the other hand, when a firm faces a deteriorating compet-
itive position in a competitive environment, managers should
consider modifying their brand strategy, updating brand prom-
ises, and enhancing the value embedded in the offerings
through rebranding projects and, even more importantly,
should signal such intentions in their rebranding
Many rebranding examples behave in accordance with our
predictions. In response to the increased competition,
Starbucks Corp. debuted a new logo on January 5, 2011.
However, this logo change was not accompanied by addition-
al significant brand strategy changes. The stock market
responded negatively to Starbucks’s rebranding choice
(CAR = −2.86%). In other examples, the rebranding initia-
tives of PepsiCo (October 13, 2008) and JCPenney (Oct. 9,
2013) also triggered very negative stock market responses,
with CARs of −15.21% and −13.54%, respectively. In con-
trast, Apple Inc.’s rebranding project (renaming Apple
Computer Inc. as Apple Inc.) in 2007 resulted in a very pos-
itive stock market response (CAR = 10.87%), most likely be-
cause it indicated Apple Inc.’s transition to a company offer-
ing a wider range of electronics. The stock market also
responded positively to rebranding initiatives announced by
Visa Inc. (January 13, 2014; CAR = 2.62%) and Southwest
Airlines (September 8, 2014; CAR = 4.18%), both of which
involved significant brand repositioning.
Secondly, we provide new insights to managers who are
considering launching rebranding projects. To compete for
internal resources effectively, marketing managers must be
held accountable for their marketing expenditures. Thus,
J. of the Acad. Mark. Sci.
marketing managers have a strong need to justify any market-
ing investment with precise financial performance metrics,
which has significant implementations for firm resource allo-
cation decisions (Balasubramanian et al. 2005; Boyd et al.
2010). The investigation of financial returns of rebranding
projects is especially important, given that rebranding projects
are usually associated with unknown risks and substantial
(and varied) costs. Our analysis shows that, rather than simply
being viewed as a cost, rebranding should be viewed as a
viable mechanism for enhancing shareholder value and an
investment that could offer stock returns on par with the cost
of the changes. According to the efficient market hypothesis, a
firm’s stock price during an event window reflects the
discounted value (net present value) of all future cash flows
due to the event. Therefore, the positive CARs indicate that
investors expect that rebranding campaigns bring out positive
future cash flows. At the executive level, these findings should
greatly increase executives’determination to initiate a
rebranding plan. At the brand manager level, these findings
support the brand managers’requests for the resources needed
to carry out successful rebranding plans.
Third, our results suggest that rebranding announce-
ments serve as signals to the market and, as a result, the
content of the announcements should be strategically
managed. Although rebranding campaigns are typically
associated with positive abnormal returns, it would be
problematic to assume that all shareholders appreciate a
firm’s rebranding efforts. As our study implies, investors
evaluate the rationale behind the rebranding information
and signals released, and their reactions to rebranding
campaigns depend significantly on their interpretations
of the rebranding features (dimensions) as well as the
necessity of that rebranding as cued by competitive fac-
tors. Therefore, effective communication between the firm
and its shareholders is needed. A rebranding firm needs to
convince investors, in the rebranding announcement, that
the rebranding project is necessary and important for
improving firm future cash flows. As Lee (1997)notes,
one of the manager roles is to offer the logic underlying
any managerial actions, so that shareholders can interpret
an announcement as a favorable event. In a rebranding
announcement, managers need to convey to shareholders
the idea that the rebranding is not a sign of weakness, but
rather a reactive or proactive step that will update the
firm’s customer-based brand equity and outperform the
Finally, we found a significantly negative impact of brand
identity age on abnormal returns. This finding suggests that
managers should be especially cautious when abandoning a
long-existing brand name, brand logo, or other brand identity-
related items. Marketing managers need to provide clearly
persuasive explanations for such decisions in their rebranding
Limitations and future research
Although our research has theoretical and managerial impli-
cations, it is not without limitations. Overcoming these limi-
tations can help inform future research. First, we performed an
event study to evaluate the worth of rebranding initiatives,
working within the confines of the efficient market hypothe-
sis. This approach is commonly supported across economics,
finance, and marketing literatures, but concerns about its va-
lidity have been expressed (e.g., Basu 1977), so future discus-
sion on the application of this hypothesis in marketing would
be warranted. In addition, one limitation inherent in the event
study methodology is that, although event studies can be used
to evaluate abnormal returns from an event, they cannot an-
swer the question of Bwhy.^As the research on rebranding
continues to accumulate, a worthwhile extension of this cur-
rent research is to assess potential mediators directly.
Another limitation of using event study methodology is
that researchers must limit their sample frame to publicly trad-
ed firms, which limits the generalizability of the results. Our
results in Tables 4and 5suggest that firm size could have a
negative impact on any abnormal returns to rebranding.
However, we excluded non-public smaller firms from our
sample because of the availability of their financial data. The
results of the current study may not apply to young or small
firms. Therefore, it would be worthwhile for the future re-
search to examine the rebranding campaigns of small firms,
possibly using survey or experimental methods.
Depending on a firm’s brand architecture (branded house
vs. house of brands), rebranding may occur on two levels:
corporate level or SBU level (Roy and Sarkar 2015). Given
the difficulties in accessing SBU-level data and evaluating
SBU-level performance, we only consider corporate-level
rebranding in our research. However, stock markets may re-
spond differently to corporate-level rebranding and SBU-level
rebranding. Thus, conclusions of this research may not be
generalized to SBU-level rebranding.
In the current research, our focus is on the short-term im-
pact of rebranding announcements on stock price. However,
given the absence of a long-term effect, as illustrated in the
additional analyses, the debate over rebranding influences
may likely continue, and further research is needed.
Rebranding is a not a one-time announcement, but rather a
more systematically planned, structured, and implemented
process (Tevi 2013). Investors may revise their initial expec-
tations of a firm’s prospective cash flows as they gain a better
understanding of the implementation of a rebranding project.
Thus, although rebranding may be generally associated with
positive short-term stock returns, a further serious challenge
for firms is executing that rebranding as planned to ensure a
positive long-term return.
Another limitation of the current research is related to the
criteria applied in coding brand identity change and brand
J. of the Acad. Mark. Sci.
strategy change. Although the inter-rater reliability is high, as
illustrated by ICC1, the coding is subject to raters’knowledge
and biases. Future research should consider new mechanical
ways to measure identity change and strategy change more
objectively. For example, Liu et al. (2017)wereabletoquan-
tify the difference between car models using a recently devel-
oped morphing technique. Such a technique may also be used
to quantify differences between logos. Content analysis tech-
niques might also be used to quantify brand strategy change
based on pre-developed dictionaries.
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