Identity change vs. strategy change: the effects of rebranding announcements on stock returns

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.