The Impact of Corporate Sports Sponsorship

A recent Seton Hall Sports poll found, as Darren Rovell of ESPN noted, that

Some of the responses to this finding were interesting, to say the least; a couple wondered if this news would “finally” lead to less corporate spending for sponsorships — a decluttering of stadiums.

I believe Rovell’s take is closer to the truth — that the number saying sports sponsorship did have an impact was too low for the money spent by sponsors.

And, importantly, it should be noted that the poll gauged what people said, not what they do.

Among marketing people, that 44% admitted that they paid attention was cause for major celebration; and perhaps, that 85% believe themselves to be unaffected by the ads was cause for even greater celebration– as advertising works best that way, just under the radar.

But what do sponsors get from these placements and affiliations?

I’ll leave that analysis to the able hands of Seton Hall, Stillman School of Business, Professor Kurt W. Rotthoff, a co-author of “Influences on Sponsorship Deals in NASCAR: Indirect Evidence from Time on Camera,” which was published in Applied Economics and looks at sponsorship value and influence. This passage below deals with sponsorship and stock price, as good a place to start as any.

Rotthoff writes:

Although the measurement of sponsorship effectiveness if notoriously difficult (for a description of the difficulty see Breuer and Rumpf 2012), the marketing literature, as well as the economics and finance literature, have all attempted to measure the overall benefit and effectiveness of corporate sponsorship dollars. In the finance literature, event studies have found a positive relation between athletic sponsorship and stock prices. Cornwell, Pruitt, and Clark (2005) find that sponsorship in the National Basketball Association (NBA), Major League Baseball (MLB), the National Hockey League (NHL), and the Professional Golfers Association (PGA) all increased the stock prices of the sponsoring firms. Pruitt, Cornwell, and Clark (2004) also find that announcement of sponsorship of a NASCAR team increases the sponsoring company’s stock price. Mahar, Paul, and Stone (2005) find that NASCAR sponsors that sell directly to end consumers have a positive relationship between winning and sponsors stock price; however, this does not hold for firms that market to businesses. Durr, Eaton, and Broker (2009) find that a portfolio of corporations that sponsor NASCAR teams consistently outperforms the risk-adjusted returns of the S&P 500.

They claim that NASCAR sponsorship sends a signal of a firm’s financial health. Other event studies have also found a relationship between athlete image and stock prices. For instance during the Tiger Woods scandal in 2009, his sports-related sponsors’ stock value decreased by over four percent and the stock prices of his top five sponsors fell by two to three percent (Knittel and Stango 2010).

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