Journal of Management and Marketing Research
The worth of sport event sponsorship: an event study
The University of Texas at Arlington
The authors investigate the relationship between sports-related event sponsorship and stock market valuation and identify factors that influence the financial rewards of sponsorship using World Cup and PGA tour sponsorship data. In particular, relationship between sports sponsorship with financial performance is examined in terms of sponsorship fit, event characteristics, and brand equity. Event study results show that sponsorship for World Cup and PGA is positively related to abnormal stock returns for sponsors but not every sponsor enjoys significantly positive cumulative abnormal returns. Regression analysis indicates that unexpectedly brand equity and U.S. country of origin is negatively associated with financial performance. However, U.S. sponsors with top brand value boost their abnormal stock return. Product fit enhances short-term financial performance but the significant impact of event type on financial outcome was not observed.
Keywords: sports sponsorship, sports marketing, event study, brand equity, sponsorship fit
The worth of sport, Page 1
Journal of Management and Marketing Research
Many companies make investment to sponsor the big sports events such as Olympic, World Cup and popular sports games. Although being official sponsor requires a huge amount of financial resource, it is expected to create more favorable outcomes including profit increase, improved stock returns, and positive advertising effect. While sports sponsorships were 7.8% of the size of advertising expense in 1985, they were 13.9% of the size in 2006 (BMI Sport info). Coca-Cola spent $40 million to become an official sponsor of 1996 Olympic Games and an estimated $500 million to maintain this sponsor status (Shani and Sandler, 1996). Sponsorship opportunities are increasing for companies to connect their brands with the world's most recognized sporting event (Syracuse, 2004). For example, Bridgestone responded quickly when electronics firm NEC announced to drop sponsorship of the PGA tournament. Bridgestone was eager to raise awareness for Bridgestone Golf on the consumer level, and to develop a unique story against its competitors on trade level (Meyer, 2006).
Given this, marketers have paid attention to the effectiveness of sports-related event sponsorship. The effect of sports sponsorship has been examined either in terms of consumer psychology or financial perspectives. However, comprehensive explanation on effect of sponsorship on financial performance and consumer behavior mechanism have different point of view. Consumer psychological approach focuses on process in which sports sponsorship is transferred into behavioral intention based on cognitive and affective psychological mechanism. Meanwhile, scholars who approach to sponsorship in terms of stock market return tend to pay most attention to financial performance or outcome. Therefore, benefits of sponsorship mentioned above have not been fully investigated because there is no integrative approach to sponsorship.
Motivated by this gap, authors attempt to provide comprehensive understanding of sports sponsorship by taking both different approaches into account. The objective of this study is to investigate association between sports sponsorship and financial performance and to identify sponsorship characteristic that can enhance financial performance. In particular, relationship between sports sponsorship with financial performance is examined in terms of sponsorship fit, event characteristics, and brand equity. Based on literature review, a conceptual framework is developed and empirical testing is conducted using World Cup held in 1998, 2002, and 2006 and PGA golf tour in 2006 season case. Then, discussion about research findings and implication are followed by empirical study.
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