A Different Perspective: Sports Sponsorship and Equity Returns

From Levi’s Stadium, home of the San Francisco 49ers, to Seattle’s Amazon-sponsored Climate Pledge Arena, corporate sponsorship is a major part of the professional sports industry. But how do these sponsorship decisions affect the stock returns of partner companies?

Although previous academic studies show mixed results, a recent meta-analytic analysis by Youngbum Kwon and T. Bettina Cornwell, professor, head of the marketing department and academic director of the Warsaw Sports Marketing Center at Lundquist College of Enterprise.

By combining 34 existing studies, hundreds of data points, and more than 20 years of research in their meta-analysis, Kwon, of Pusan ​​National University in Korea, and Cornwell examined whether stock value was affected. or not by corporate partnerships with sports teams.

Kwon and Cornwell recently published the results in the article “Sports Sponsorship Announcement and Stock Returns: a Meta-Analytic Review” in the International Journal of Sports Marketing and Sponsorship.

Prior to Kwon and Cornwell’s research, similar studies isolated to specific sponsorship announcements found negligible impact on stock price at all stages of the process. The meta-analytic approach employed by Cornwell and his fellow researcher, however, revealed a significant increase in share value, particularly in the days leading up to the announcement of a partnership.

The researchers’ area of ​​interest was the event window: just before, during, and immediately after a corporate sports sponsorship announcement; they also controlled for market confounders, such as the death of a CEO, among other examples.

The findings make sense, according to Cornwell.

“There are a lot of people involved in the decision to spend millions of dollars sponsoring a team or a league for naming rights,” she explained, people involved on the side of the company in the process, to those employed by the team, and any number of lawyers or other tertiary actors.

For this reason, news of an impending corporate sports sponsorship announcement is bound to leak, affecting stock prices.

It’s instructive to know that in all of these studies, stock prices rose, increasing the value of corporate sponsors, Cornwell said.

What is also illustrated in Kwon and Cornwell’s research is the importance of meta-analysis. Due to the size and scope, similar studies lacked adequate data points to draw conclusions similar to Kwon and Cornwell’s analysis.

Through a numerical reassessment of the results of all these studies, however, a different picture emerged, Cornwell said.

In any study, “you don’t get the power that you get when you look through the studies,” she continued. “You’re starting to see a different story through the power of meta-analysis.”

—William Kennedy, Lundquist College Communications

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