Wednesday, July 28, 2004

A look at what happens when sport stars do good and when they do bad

Have you ever wondered what happens to the stock of a sponsoring firm when the endorser does well? How about when the endorser does bad? For example, when Kobe Bryant was arrested, what happened to the firms whose products he endorsed (namely Nike, McDonalds and Coke (the owner of Sprite))? I did and this past year I got talking about it with some students and we could not find much evidence so we began to investigate it ourselves. While the students changed over the course of the project (hence the large number of acknowledgements) we finally did finish it this past week. The paper is now coauthored by Betsy Drewniak and Dr. Mike Russell.

The result? After removing firms that had other news items on the same day (i.e. confounding events), when a endorsee did well (set a world records, named MVP etc), the sponsoring firm experienced an market adjusted abnormal return of just over 1% for the -1 to + 3 day event window. For bad events (that is when the endorsee is arrested etc), the stock price fell by about 2% over the 0-1 day window. (BTW good events tend to be more predictable, hence the -1 day instead of day zero.)

SO the results fit theory almost perfectly. The paper was just submitted, but if you have any suggestions, please let us know. THANKS!,%202004.pdf

PS Yeah I know this is sort of cheating putting my own work up, but I was in a real hurry today and would love comments, so....

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