Abstract
This study employs an event study and cross-sectional regression model to investigate stock price performances when companies announce to adopt or discard professional sports teams. The results show that there is a negative impact on the stock price of parent companies after announcing adoption, whereas, a positive impact occurs after announcing discarding. Nevertheless, the effects of adopting and discarding events on stock prices are both negative before announcements. In addition, the relationship between the degree of impact and the price to earnings ratio is negative—that is, the stock price of a lower profitability company will drop more when the event happens. Therefore, although many companies increase their awareness by adopting sports teams, investors still need to consider cautiously when deciding to make a short-term investment in the sports team’s parent company.
JEL classifications: G02, G10, G14
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Notes
- 1.
For example, Kamstra et al. (2000, 2003, and 2012), Symeonidis et al. (2010), Jacobsen and Marquering (2008), Levy and Galili (2008), Chang et al. (2008), Cao and Wei (2005), Hirshleifer and Shumway (2003), and Saunders (1993) indicated that weather conditions, including sunshine, daylight, and temperature, affect stock returns. In addition, Yuan et al. (2006) found that lunar phases have a great influence on stock market performance, showing that stock markets present poor performances during a full moon.
- 2.
Please refer to Audi’s official site (http://www.audi.com) and Real Madrid Club (http://www.realmadrid.com/cs/Satellite/en/Home).
- 3.
BenQ Corporation was the major sponsor of UEFA in 2008 (http://www.uefa.com/newsfiles/503988.pdf). For related sponsor information of Volkswagen AG and Acer Group, please refer to the following two websites for detailed information. http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2008/03/volkswagen_sponsors_the_2008_olympic_games.html and http://www.acer-group.com/public/News/2012/20120604-3.htm. Furthermore, Acer Group invited Chien-Ming Wang, a pitcher for the New York Yankees (2005–2009), to endorse one of its new computer launches in Taiwan (http://aspire8920 g.acer.com.tw/).
- 4.
Please refer to Table 1 for the detailed information of companies and the event days.
- 5.
eSports (Electronic sports) is a term for organized video game competitions, especially between professionals. The international e-Sports Federation was founded in 2008 by nine e-Sports associations from Denmark, South Korea, Germany, Austria, Belgium, The Netherlands, Switzerland, Vietnam, and Taiwan.
- 6.
There are two alliances of professional baseball teams during the study period; one is Chinese Professional Baseball League (CPBL) and the other is Taiwan Major League (TML). Likewise, professional basketball teams have two alliances; they are Super Basketball League (SBL) and Chinese Basketball Alliance (CBA). The alliance of eSports is Taiwan e-Sports League (TeSL).
- 7.
This chapter determines the event period and estimated period from Chen and Chen (2012).
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Chen, CC., Chen, CD. (2015). The Effects of Adopting and Discarding Sports Teams on Firm Values: Evidence from Taiwan. In: Lee, Y., Fort, R. (eds) The Sports Business in The Pacific Rim. Sports Economics, Management and Policy, vol 10. Springer, Cham. https://doi.org/10.1007/978-3-319-10037-1_11
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