Firm names and profitability in German food processing

Abstract

We analyse the signalling effect of a strategy known as eponymy whereby owners integrate their name into the company name. Using microdata from German food processors, we find that eponymous companies generate 2.8 per cent-points higher return on assets, which implies additional yearly profits of €253,000 for a median-sized company. The eponymy effect increases with ownership concentration, indicating that the more control an owner holds over the company, the stronger the signalling. Long names ranking low in the alphabetical order mitigate the effect. This study applies a novel approach to investigate the causal effect of firm naming and thus has implications for food processors.