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1 – 1 of 1Morten Halsteinli Drivdal, Helge A. Nordahl and Håkon Rønes
The purpose of this paper is to assess how sponsorships affect firm values in professional cycling. Both the effect of entering a sponsorship contract and reactions to good or bad…
Abstract
Purpose
The purpose of this paper is to assess how sponsorships affect firm values in professional cycling. Both the effect of entering a sponsorship contract and reactions to good or bad news during the contract period are investigated. Doping scandals are used as examples of bad news and race wins as examples of good news.
Design/methodology/approach
The well-known event-study methodology of analyzing stock prices is used. In order to avoid unnecessary noise, the main emphasis is on short-term stock market effects.
Findings
The main original finding is a significant negative reaction to doping scandals within the sponsored team, indicating that the outcome of sponsoring agreements is important for investors. There are no significant stock market reactions to the announcement of sponsorships, hence sponsoring cycling teams in general are perceived as value neutral to the sponsor.
Originality/value
The paper encourages sponsors and cycling teams to focus on anti-doping measures as doping scandals are perceived as value destructive. This contradicts previous studies with smaller data samples. The negative impact of doping scandals outweighs the potential positive effects of winning cycling races.
Details