Should They Play? Market Value of Corporate Partnerships With Professional Sport Leagues

Abstract

Corporate partnerships with professional sport leagues are growing rapidly. How can we assess the value of such partnerships? Using an event study method, this research examined the economic effects of corporate partnerships with six professional sport organizations (NFL, MLB, NBA, NASCAR, NHL, and PGA). Three new interesting results were found. (1) Though a partnering firm experiences a net-of-market increase in shareholders’ value of 2.93% from a new corporate partnership with a professional sport league at the two-day window (0, +1), renewals of corporate partnerships induced a significant net-of-market decrease of 1.12% during the same window of time. (2) Cross-sectional analysis revealed that superior performing firms as well as firms with higher institutional and moderate managerial ownership benefitted more than the average, and (3) the integrations of the partnerships with other business strategies elicited different responses from the investment community. Overall, a strategic implication was that marketing-focused partnerships in financially sound, well-managed firms contributed the most to enhancement in shareholders’ wealth.