, Volume 46, Issue 4, pp 283–300 | Cite as

Shareholders’ reaction to ethical image of sports teams: an event study in the Indian Premier League

  • Saravana JaikumarEmail author
  • Viswanath Pingali
  • Vineet Virmani
Research Article


Using event study analysis on a sports team and parent firm in the Indian Premier League, we show that investors react adversely to: (1) unethical but legal activity that may have a positive impact on the firm’s value and (2) unethical and illegal activity that does not necessarily impact the day-to-day performance of the firm. We use the novel sample-quantiles test to analyze the events in a ‘single-firm single-event’ context. Results suggest that investors are sensitive to and care about the ethical image of the sports team and parent firm. Further, when the parent firm’s core function is unrelated to the sport, the performance of the team may not have a significant impact on the firm’s valuation. We also make a broader contribution wherein we provide direct evidence linking unethical activities with negative valuation, while ruling out the rent-seeking explanation.


Corporate image Corporate reputation Ethics Indian Premier League Event study 



  1. Ali QM (2013) Former BCCI president Muthiah submits 12 more instances of 'conflict of interest' against Srinivasan in Supreme Court. Retrieved 21 Nov 2014
  2. American-Appraisal (2015) A concise report on brand values in the Indian Premier League. Retrieved 11 Oct 2015
  3. Baker TL, Hunt TG, Andrews MC (2006) Promoting ethical behavior and organizational citizenship behaviors: the influence of corporate ethical values. J Bus Res 59(7):849–857CrossRefGoogle Scholar
  4. Becchetti L, Ciciretti R, Hasan I, Kobeissi N (2012) Corporate social responsibility and shareholder's value. J Bus Res 65(11):1628–1635CrossRefGoogle Scholar
  5. Becker-Olsen KL, Cudmore BA, Hill RP (2006) The impact of perceived corporate social responsibility on consumer behavior. J Bus Res 59(1):46–53CrossRefGoogle Scholar
  6. Brunk KH (2010) Exploring origins of ethical company/brand perceptions—a consumer perspective of corporate ethics. J Bus Res 63(3):255–262CrossRefGoogle Scholar
  7. Brunk KH, Blümelhuber C (2011) One strike and you're out: qualitative insights into the formation of consumers' ethical company or brand perceptions. J Bus Res 64(2):134–141CrossRefGoogle Scholar
  8. Brown GW, Hartzell JC (2001) Market reaction to public information: the atypical case of the Boston Celtics. J Financ Econ 60(2):333–370. CrossRefGoogle Scholar
  9. Business Standard (2014) Brand IPL still rules unchallenged. Retrieved 11 Oct 2015
  10. Chakraborty S, Sen AK, Bagchi A (2012) Combinatorial auctions for player selection in the Indian Premier League (IPL). J Sports Econ 16(1):1–22. CrossRefGoogle Scholar
  11. Choi TH (2012) Do ethical companies have lower implied cost of equity capital? Evidence from the Korean stock market. Asian Bus Manag 11(2):219–246. CrossRefGoogle Scholar
  12. CNN-IBN (2013) Vindoo reveals connection with a relative of CSK owner. Retrieved 10 Nov 2013
  13. Conley TG, Taber CR (2011) Inference with difference in differences with a small number of policy changes. Rev Econ Stat 93(1):113–125. CrossRefGoogle Scholar
  14. Efron B, Tibshirani R (1998) The problem of regions. Ann Stat 26(5):1687–1718CrossRefGoogle Scholar
  15. Epstein MJ, McEwen RA, Spindle RM (1994) Shareholder preferences concerning corporate ethical performance. J Bus Ethics 13(6):447–453. CrossRefGoogle Scholar
  16. ESPNcricinfo (2010) BCCI pulled up over conflict of interest. Retrieved 25 Nov 2014
  17. Fama E (1970) Efficient capital markets: a review of theory and empirical work. J Finance 25(2):383–417. CrossRefGoogle Scholar
  18. Farrell KA, Karels GV, Monfort KW, McClatchey CA (2000) Celebrity performance and endorsement value: the case of Tiger Woods. Manag Finance 26(7):1–15. CrossRefGoogle Scholar
  19. Gelbach JB, Helland E, Klick J (2013) Valid inference in single-firm, single-event studies. Am Law Econ Rev 15(2):495–541. CrossRefGoogle Scholar
  20. Ghosh S, Harjoto MA (2011) Insiders' personal stock donations from the lens of stakeholder, stewardship and agency theories. Bus Ethics Eur Rev 20(4):342–358. CrossRefGoogle Scholar
  21. Groening C, Kanuri VK (2013) Investor reaction to positive and negative corporate social events. J Bus Res 66(10):1852–1860CrossRefGoogle Scholar
  22. Gunthorpe DL (1997) Business ethics: a quantitative analysis of the impact of unethical behavior by publicly traded corporations. J Bus Ethics 16(5):537–543. CrossRefGoogle Scholar
  23. Hein SE, Westfall P (2004) Improving tests of abnormal returns by boot-strapping the multivariate regression model with event parameters. J Financ Econom 2(3):451–471. CrossRefGoogle Scholar
  24. Hindustan Times (2013) Spot-fixing: Sreesanth, 2 other cricketers held; all accused sent to 5-day police custody. Retrieved 10 Nov 2013
  25. Hughes SF, Shank MD (2008) Assessing the impact of NCAA scandals: An exploratory analysis. Int J Sport Manag Mark 3(1–2):78–99. CrossRefGoogle Scholar
  26. India Cements (2013) Annual report-2013. Retrieved 03 Mar 2014
  27. Jaikumar S, Sahay A (2015) Celebrity endorsements and branding strategies: event study from India. J Prod Brand Manage 24(6):633–645CrossRefGoogle Scholar
  28. Kjeldsen E (1992) The manager's role in the development and maintenance of ethical behavior in the sport organization. J Sport Manag 6(2):99–113CrossRefGoogle Scholar
  29. Knittel CR, Stango V (2013) Celebrity endorsements, firm value, and reputation risk: evidence from the Tiger Woods scandal. Manag Sci 60(1):21–37. CrossRefGoogle Scholar
  30. Kothari S, Warner JB (2007) Econometrics of event studies. In: EspenEckbo B (ed) Handbook of corporate finance: empirical corporate finance (Chapter 1). Elsevier, Amesterdam, pp 3–36CrossRefGoogle Scholar
  31. Kulshreshtha P (2005) Business ethics versus economic incentives: contemporary issues and dilemmas. J Bus Ethics 60(4):393–410. CrossRefGoogle Scholar
  32. MacKinlay AC (1997) Event studies in economics and finance. J Econ Lit 35(1):13–39Google Scholar
  33. Mathur LK, Mathur I, Rangan N (1997) The wealth effects associated with a celebrity endorser: the Michael Jordon phenomenon. J Advert Res 37(3):67–73Google Scholar
  34. Mishra V, Smyth R (2010) An examination of the impact of India's performance in one-day cricket internationals on the Indian stock market. Pac Basin Finance J 18(3):319–334. CrossRefGoogle Scholar
  35. Ngan HM, Prendergast GP, Tsang AS (2011) Linking sports sponsorship with purchase intentions: team performance, stars, and the moderating role of team identification. Eur J Mark 45(4):551–566CrossRefGoogle Scholar
  36. Pae J, Choi TH (2011) Corporate governance, commitment to business ethics, and firm valuation: evidence from the Korean stock market. J Bus Ethics 100(2):323–348. CrossRefGoogle Scholar
  37. Rao SM, Hamilton JB III (1996) The effect of published reports of unethical conduct on stock prices. J Bus Ethics 15(12):1321–1330. CrossRefGoogle Scholar
  38. Sethuraman M (2013) What makes the IPL successful? Retrieved 10 Oct 2015
  39. Times of India (2013) Chennai Super Kings owner Gurunath Meiyappan arrested in IPL betting case. Retrieved 10 Nov 2013
  40. Tischer S, Hildebrandt L (2014) Linking corporate reputation and shareholder value using the publication of reputation rankings. J Bus Res 67(5):1007–1017CrossRefGoogle Scholar
  41. Vogel D (1991) The ethical roots of business ethics. Bus Ethics Q 1(1):101–120. CrossRefGoogle Scholar
  42. Wilson R, Plumley D, Ramchandani G (2013) The relationship between ownership structure and club performance in the English Premier League. Sport Bus Manag Int J 3(1):19–36. CrossRefGoogle Scholar
  43. Wheeler M (1994) Ethics and the sports business. Bus Ethics Eur Rev 3(1):8–15. CrossRefGoogle Scholar
  44. Whysall P (2014) Reflections on ethics, sport and the consequences of professionalisation. Bus Ethics Eur Rev 23(4):416–429. CrossRefGoogle Scholar
  45. Wu M (2002) Earnings restatements: a capital market perspective. Available at SSRN 1844265Google Scholar
  46. Wu SH, Tsai CYD, Hung CC (2012) Toward team or player? How trust, vicarious achievement motive, and identification affect fan loyalty. J Sport Manag 26(2):177–191CrossRefGoogle Scholar

Copyright information

© Indian Institute of Management Calcutta 2019

Authors and Affiliations

  1. 1.Indian Institute of Management CalcuttaKolkataIndia
  2. 2.Department of EconomicsIndian Institute of Management AhmedabadAhmedabadIndia

Personalised recommendations