How Sports Sponsorship Influences a Sponsor’s Financial Performance: A Case Study from the Korea Baseball Organization

Abstract

Abstract: This study aims to examine the effects of sponsorship on the sponsor’s financial performance. This study investigates return on sponsorship (ROS) with a quantitative analysis. Nexen Tire’s title sponsorship agreement with the Heroes baseball club in the Korea Baseball Organization (KBO) in 2010 is studied. The positive effect of sponsorship on the sponsor’s Tobin’s q is confirmed by comparing the non-sponsorship period (2000–2009) with the sponsorship period (2010–2018). It is also shown from an event study that the sponsor experiences negative abnormal stock returns on the news of the sponsorship agreement, though this was not found to be statistically significant. Still, when the sponsee enters the postseason, positive cumulative abnormal returns are observed, particularly significant 10 days before the postseason games. This study confirms the positive influence of sponsorship on the sponsor’s financial performance and, with evidence from South Korea, provides insight into Asian markets in need of research. The results suggest that 10 days before a postseason game would be an ideal time to leverage marketing and activate a sponsorship strategy.