The “official Paper” on Official Sponsorships: the Impact of Major League Sports Official Sponsorship Announcements on the Stock Prices of Sponsoring Firms

This study presents the first formal analysis of the impact of “official product” or “official service” sports sponsorships of the National Football League (NLF), Major League Baseball (MLB), the National Hockey League (NHL), the National Basketball Association (NBA), and the Professional Golfers’ Association (PGA) on the stock prices of sponsoring firms. The primary finding of the study—that major league official sponsorship announcements were accompanied by economically and statistically significant increases in shareholder wealth—represents a striking and unambiguous stock market endorsement of the sponsorships. Indeed, the 53 sponsors analyzed in this study experienced mean increases in shareholder wealth of between $123 million and $558 million, net of all of the costs expected to be associated with the sponsorships. A multiple regression analysis of firm-specific stock price changes and select corporate and sponsorship attributes indicates that official product or service sponsorships with the NBA, NHL, and PGA and those with smaller product/service market shares were associated with the largest gains in share prices. While corporate cash flow (a proxy for agency conflicts within a firm) is statistically unrelated to shareholder approval, sponsorships by high technology companies were associated with stronger stock price reactions than otherwise (a variable shown in previous research to be consistent with corporate signaling). Finally, product or service “congruence” or “relatedness” with the overall sporting experience was positively related to changes in stock prices at the time of announcement of the official sponsorships.