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Are sponsorship announcements good news for the shareholders? Evidence from international stock exchanges

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Abstract

The objective of this study is to analyse investors’ perceptions of sponsorship’s ability to increase brand equity, through the impact of sponsorship announcement on stock market value. An event study method, based on a unique sample of 293 worldwide sponsorship announcements from 2010, shows substantial negative abnormal returns following announcement dates. In addition, a cross-sectional regression analysis reveals the influence of several featured factors. Philanthropic sponsorships and sponsorships of events with distinctive values are less negatively perceived by investors, but US companies exhibit more negative returns in shareholder value than other firms. This study offers no support for varying impacts of event audience, renewal agreement, property sponsorship and title sponsorship on abnormal returns though.

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Notes

  1. Brown and Warner (1985) show there is no significant difference between the abnormal returns derived from their method and previous methods, such as Scholes and Williams’s (1977).

  2. Campbell and Wasley (1993), Maynes and Rumsey (1993), and Bartholdy et al. (2007) note problems that make standard parametric event study tests poorly specified; the rank test outperforms parametric tests.

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Acknowledgments

The authors would like to thank Dr. Charles Bal, former General Manager of brandRapport France, who invited us to analyze the database at the core of this study. We also thank Vincent de Lavarenne for his outstanding research assistance. Finally, we greatly appreciate the constructive comments offered by editor G. Tomas M. Hult and two anonymous reviewers.

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Authors and Affiliations

  1. Ehrenberg Bass Institute for Marketing Science, University of South Australia, Level 4, Yugondi Building, City West Campus, 70 North Terrace, Adelaide, South Australia, 5000

    Marc Mazodier

  2. ISG Business School, 8 rue de Lota, 75116, Paris, France

    Marc Mazodier & Amir Rezaee

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  1. Marc Mazodier
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Correspondence to Marc Mazodier.

Appendix

Appendix

To assess the sponsorship announcement’s impact on shareholders’ wealth, we implemented a market model for abnormal returns. We estimated the market model variables (α and β) for an estimation period immediately before the event period. The estimation period lasted 125 days; the event period is composed of days −15 to +15 around the announcement date.

Let Rit be the observed return for security i on day t and Rmt be the return on the index for day t. The abnormal return ARit for security i on day t is

$$ A{R_{it }}={R_{it }}-\left( {{\alpha_i}+{\beta_i}{R_{mt }}} \right) $$
(1)

The average abnormal return on day t for a given sample of N sponsorship announcements is

$$ AA{R_t}=\frac{1}{N}\sum\limits_{j=1}^N {A{R_{jt }}} $$
(2)

Then, the cumulative average abnormal return between event days a and b can be calculated as:

$$ CAA{R_{a,b }}=\frac{1}{N}\sum\limits_{j=1}^N {\sum\limits_{t=a}^b {A{R_{jt }}} } $$
(3)

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Mazodier, M., Rezaee, A. Are sponsorship announcements good news for the shareholders? Evidence from international stock exchanges. J. of the Acad. Mark. Sci. 41, 586–600 (2013). https://doi.org/10.1007/s11747-013-0325-x

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