Abstract
Using the results of 1068 different golf, tennis, and track and field (in particular: running) events, this paper examines the relation between athlete performance and stock returns of firms endorsed by athletes. We find that a tournament victory is associated with significant and positive market-adjusted stock returns for the endorsed clothing brand. Regression analysis reveals that winning is associated with a more positive price reaction than finishing as runner-up. In addition, we find that returns after a victory are significantly higher for endorsed clothing brands than for equipment brands. We did not detect return differences between superstars and regular athletes, nor between frequently endorsed brands and less commonly endorsed brands.
Highlights
We study the relationship between athlete performance and the stock returns of firms endorsed by these athletes
Highly visible brands may encounter different stock returns than less visible brands (e.g., Farrel et al 2000). In response to these identified issues, we focused on popular individual sports, namely golf, tennis, and track and field
We conclude that endorsed clothing brands exhibited statistically significant returns, as cumulative 5-day market-adjusted returns were positive after the enlisted athlete recorded a tournament victory
Summary
We study the relationship between athlete performance and the stock returns of firms endorsed by these athletes. Nicolau and Santa-María (2013) focused on tennis They studied the performance of Rafael Nadal alongside the stock returns of the endorsed firms. Highly visible brands (i.e., on clothing) may encounter different stock returns than less visible brands (e.g., Farrel et al 2000) In response to these identified issues, we focused on popular individual sports, namely golf, tennis, and track and field (in particular: running).. Previous research indicated that there is a positive effect, but these studies considered just one athlete (e.g., Farrell et al 2000; Nicolau and SantaMaría 2013) or they grouped different categories of endorsed brands (Elberse and Verleun 2012).
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