Sport Management Review

ISSN: 1441-3523 (Print) 1839-2083 (Online) Journal homepage: https://www.tandfonline.com/loi/rsmr20

Market reactions to sport sponsorship

announcements: Comparison between sponsors
and their rivals

Yuta Hino & Fumiko Takeda

To cite this article: Yuta Hino & Fumiko Takeda (2020) Market reactions to sport sponsorship
announcements: Comparison between sponsors and their rivals, Sport Management Review, 23:3,
401-413, DOI: 10.1016/j.smr.2019.02.002

To link to this article: https://doi.org/10.1016/j.smr.2019.02.002

Published online: 27 Feb 2019.

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 Sport Management Review 23 (2020) 401–413

Contents lists available at ScienceDirect

Sport Management Review

journal homepage: www.elsevier.com/locate/smr

Market reactions to sport sponsorship announcements:

Comparison between sponsors and their rivals$
Yuta Hino, Fumiko Takeda*
Department of Technology Management for Innovation, University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo 113-8656 Japan

A R T I C L E I N F O A B S T R A C T

Article history: In this study, the authors investigate the impact of sport sponsorship announcements on
Received 3 August 2018 the stock prices of sponsors and their rivals in Japan. The event study analyses show that
Received in revised form 17 February 2019 while market reactions for Japanese sponsors are significantly positive, those for rivals are
Accepted 17 February 2019
significantly negative. Thus, in Japan, sponsorships might help sponsors build a competitive
Available online 27 February 2019
advantage over their rivals. During 2010–2014, market reactions for sponsors are
significantly more negative but less so when the sponsored party is Japanese.
Keywords:
© 2019 Sport Management Association of Australia and New Zealand. Published by Elsevier
Sport sponsorship
Event study
Ltd. All rights reserved.
Stock prices
Ambush marketing

1. Introduction

Sponsorship has been steadily growing as a popular marketing tool over the past 30 years. A key benefit of sponsorships is
that more consumers become aware of the goods and services a firm offers and are attracted to them through image transfer,
resulting in increased purchases and higher firm value. According to IEG and ESP Properties, sponsorship spending was
$5.6 billion in 1987 and increased to $62.7 billion in 2017, growing more than tenfold during the past three decades (Fig. 1).
The most developed area of sponsorship is sport, which accounts for approximately 70% of all sponsorship activities in North
America. The globalization of sport events and increased media coverage have rendered sports more valuable as a means to
enhance company brands through awareness and image transfer. According to Fig. 1, North America accounts for more than
one-third of global sponsorship spending. However, given Asia Pacific’s strong economic growth, it is emerging as the
destination for sponsorship spending and is likely to catch up with Europe and North America.
Notwithstanding the intended benefits, sport sponsorship may not always increase the sponsor’s value. Compared to
advertising, another popular marketing tool, sponsorships tend to deliver less direct and less explicit messages that are more
difficult to control (Walliser, 2003). In addition, sport sponsorships entail costs such as the recently increasing sponsorship
fees. Many studies suggest an escalating trend in sponsorship fees consistent with the growth of the sponsorship market
(Clark, Cornwell, & Pruitt, 2009; Davis, 1996; Sandler & Shani, 1989). For example, Toyota paid $835 million to sign on a
sponsorship for the span of four Olympic Games, that is, 2017–2024 (Boudway, 2017). A total of $866 million was invested to

$
We would like to thank the editors, anonymous reviewers, Ihsan Badshah, Markus Breuer, GabrielA. Giménez Roche, and other participants at the ICS
Faculty Seminar at Hitotsubashi University, the 2016 Vietnam Symposium in Banking and Finance, the 13th International Conference of the Western
Economics Association International, and the 85th Conference of the International Atlantic Economic Association for their helpful comments and
suggestions. We are also grateful to Editage (www.editage.jp) for English language editing. This research did not receive any specific grant from funding
agencies in the public, commercial, or not-for-profit sectors. All remaining errors are our own.
* Corresponding author.
E-mail addresses: yuta.hino@gmail.com (Y. Hino), takeda@tmi.t.u-tokyo.ac.jp (F. Takeda).

https://doi.org/10.1016/j.smr.2019.02.002
1441-3523/© 2019 Sport Management Association of Australia and New Zealand. Published by Elsevier Ltd. All rights reserved.
402 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

Fig. 1. Evolution of total sponsorship spending (billion USD).

Source: ESP Properties (2018) and IEG (2016, 2014, 2012, 2011).

support the Turin and Beijing Games in 2006 and 2008 (Balfour, 2008). However, there is little reason to believe that the
effectiveness of sport sponsorship increases in proportion with pricing. Thus, investors can expect future cash flows from
sport sponsorships to decrease over time. Consistent with these observations, recent empirical studies demonstrate negative
or insignificant market reaction, or positive but declining market response over time, to sport sponsorships (Abril, Sanchez, &
Recio, 2016; Clark et al., 2009; Cobbs, Groza, & Pruitt, 2012; Mazodier & Rezaee, 2013).
Furthermore, it is unclear if sport sponsorships enable sponsors to build a competitive advantage over rivals.
Theoretically, sponsorship investments can either benefit or damage rival firms depending on the conditions. On the one
hand, rival firms can experience a decreasing value as they lose customers to sponsors. In this case, at least some of the value
a sponsor gains through sponsorship is at the rivals’ expense. On the other hand, if sponsorship investments have industry
spillover effects, they can enhance awareness and brand image of the goods or services produced by both sponsors and rivals,
resulting in increased demand and value for both.
Against this backdrop, whether sport sponsorship is beneficial or detrimental for sponsors and their rivals is an empirical
question. To address the question, we adopt event study methodology to investigate whether and how sport sponsorships
announced by Japanese-listed firms between 1991 and 2014 affect stock prices of sponsors and their rivals. We show that
while market reactions for Japanese sponsors are significantly positive, the same are negative for rivals. In addition, during
2010–2014, market reactions for sponsors are significantly more negative but less so when the sponsored party is Japanese.
The results of this study shed light on the key factors used to generate successful outcomes in sport sponsorship in Japan, which
is scheduled to host major sporting events such as the Rugby World Cup in 2019 and the 2020 Tokyo Olympic Games that will
present opportunities for sponsors and sponsored parties. Our results show that sponsors can build competitive advantage over
their rivals through sport sponsorships in the Japanese market. The positive effects of sport sponsorship are also intensified when
the sponsored party is a sport league, game, or naming rights and, in recent years, when it is Japanese. Revealing these factors is
particularly important because the rapidly rising sponsor fees have been diminishing the positive impacts of sport sponsorship.
We make the following four key contributions to the literature. First, we could not identify other studies where authors
conducted statistical analysis on the effect of sport sponsorship on rival firms using financial data (see Table 1 for a summary
of prior studies). Second, most prior studies have drawn samples from western countries, despite Asia Pacific reporting
fastest growing sponsorship spending worldwide in recent years. Thus, this study may be the first to focus on market
reactions to sport sponsorship announcements in Japan. Third, we test the hypotheses that prior studies have produced
mixed results. Finally, we employ the Fama–French three-factor model when applying the event study methodology to
Japanese data, whereas prior studies use a simple one-factor market model.

2. Literature review on the effects of sport sponsorship

Typically, companies hope to make an impact on consumers through sport sponsorships (Crimmins & Horn, 1996), which
have the potential to enhance brand awareness, image, and loyalty. By increasing the exposure of sponsor brands,
sponsorships can enhance brand awareness (Quester & Thompson, 2001). Sponsoring relationships are also expected to
improve brand image by transferring consumers’ positive perception of the sponsored property to the sponsor’s brand
(Cornwell & Maignan, 1998; Gwinner & Eaton, 1999). According to Mazodier and Merunka (2012), sponsorships increase
brand loyalty to a higher degree than advertising. Thus, sponsors expect increased demand for their goods or services, which
in turn enhance future cash flows.
However, while investment values are tangible, it is difficult for sponsorships to produce short-term outcomes that reflect
measurable and quantitative value. In other words, precisely measuring the amount of sales generated from improved brand
image through sport sponsorships is difficult. Meenaghan (2013) stated that the demand for transparency and accountability
in sponsorship investments has been increasing since the 2008 financial crisis, leading to the need for measures of
performance efficiency and effectiveness.
Table 1
Prior studies on market reactions to sport sponsorship announcements.

Source Events CAARs Sample Location Period of study Significant independent Insignificant independent
size variables variables
Agrawal and Kamakura (1995) Celebrity endorsement Positive (-1, 0) 110 US 1980-1992 N/A N/A
contracts
Farrell and Frame (1997) 1996 Atlanta Olympics Negative (0, 2) 26 US 1996 Outside shareholders (+) Assets, Inside, Repeat
Mishra et al. (1997) Sport sponsorship Positive (-1, 0) 76 (50 sports) US 1986-1995 ROA (+) MVE, TA, Sales, Mkt/Book,
announcements collected Leverage, Adv/Sales, R&D/
from The Wall Street Journal Sales, EPS, Price/EPS
Miyazaki and Morgan (2001) 1996 Atlanta Olympics Positive (-4, 0), 27 US 1996 N/A N/A
(-3, 0)
Clark et al. (2002) Corporate stadium Positive (-1, 1), (0,1) 49 US 1985-2000 High tech (+), Market value Yearly cost, Host city
sponsorships in NFL, NBA, (-), Contract length (+), population
NHL and MLB Winning percentage (+),

Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

Local sponsor (+)
Pruitt et al. (2004) NASCAR Positive (-1, 0) 24 US 1995-2000 Winning percentage (+), Size
Corporate/division (+),
Functional relatedness (+)
Cornwell, Pruitt et al. (2005) Official product Positive (-2, 2) 53 US 1990-2003 Market share (-), High tech Market value, Cash flow,
sponsorship: NFL, MLB, (+), Congruence (+), NBA NFL
NHL, NBA, PGA (+), NHL (+), PGA (+)
Calderon-Martinez, Mas-Ruiz, Commercial and Positive for 58 Spain 1992-2003 Commercial/philanthropy New event
and Nicolau-Gonzalbez, (2005) philanthropic sponsorship commercial (+), Congruence (-), Size (+)
sponsorship
Clark et al. (2009) Title sponsorships in PGA, Insignificant 114 US 1990-2004 Market value (-), High tech Cash flow, Renewal
LPGA, tennis tournaments, (+), Congruence (+)
NASCAR races and NCAA
bowl games
Reiser et al. (2012) Sport sponsorships based Positive (-1, 0), 629 Asia, Europe, US 1999-2010 Corp (-), Olympics (+), New, Tech, Naming, Europe,
on The World Sponsorship (-1, 1) AsiaPac (-), Internat (-), Size F1, NASCAR
Monitor (-), Menala (+)
Cobbs et al. (2012) Formula 1 Negative (0, 1), 73 Asia, Europe, US 1994-2007 Investment level (+), Functional relatedness
(0, 10) Nationality congruence (+)
Deitz et al. (2012) (i) Initial official product (i) Postive, (i) 37 & 49, US (i) (ii) 1992-2003 N/A N/A
sponsorship, (ii) Renewal (ii) Insignificant, or (ii) 58, or or (iii) 1996
official product (iii) Negative (iii) 27 & 29
sponsorship, or (iii) (0, 2)
1996 Atlanta Olympics
Mazodier and Rezaee (2013) Sport sponsorship Negative (0, 1), 293 24 countries 2010 Commercial (-), Title, Property, Audience,
announcements collected (0, 2) Differentiation (+), US(-) Congruence, Amount/sales,
from BrandRapport France Renewal, Technology,
Brand size, Brand equity
Cashflow/sales
Abril et al. (2016) 4 global sports Positive (-5, 5) 98 15 countries 1998-2009 N/A N/A
tournaments - Olympic
Games, FIFA World Cup,
UEFA European Soccer
Championship, and
America's Cup

403
404 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

Among the impact measures for sport sponsorships, a growing body of literature uses the event study methodology by
estimating stock price reactions to sponsorship announcements. Financial theory suggests that given the rational investors
in an efficient market, current stock prices reflect all publicly available information and move only in response to unexpected
events possibly affecting a firm’s future profitability. Such unexpected but significant events include sport sponsorship
announcements, which can be examined using the event study methodology (Cornwell, Pruitt et al., 2005). If sport
sponsorships influence changes in future earnings, this effect will be reflected in the stock prices at the time of the
sponsorship announcement. Thus, the event study methodology allows researchers to examine the impact of sponsorship on
firm value through stock price reactions. The remainder of this section reviews the literature that uses the event study
methodology to measure the economic impact of sport sponsorships.
Several studies focus on specific sport events such as the Olympics or National Association for Stock Car Auto Racing
(NASCAR). Deitz, Myers, and Stafford (2012) conducted an event study on the sponsors of the 1996 Atlanta Olympics.
Eliminating potential confounding events, they provided evidence of a negative relationship. Pruitt, Cornwell, and Clark
(2004) examined market reactions to the 24 sponsorships of NASCAR announced between 1995 and 2001 and found a mean
increase in shareholder wealth of more than $300 million. It appears that positive market responses are intensified for
sponsorships with direct ties to the consumer automotive industry.
Other studies focus on the specific types of sponsorship agreements such as naming rights, official product sponsorships,
and title sponsorships. Deitz et al. (2012) investigated market reactions to the announcements of official product
sponsorships for the National Football League (NFL), Major League Baseball (MLB), National Hockey League (NHL), National
Basketball Association (NBA), and Professional Golfers Association (PGA). Dividing the sample into initial official product
sponsorships and renewal, Deitz et al. (2012) reported positive results for the former and insignificant ones for the latter.
Clark et al. (2009) investigated market reactions to 114 title sponsorship announcements for professional tennis and golf
tournaments, auto racing (NASCAR), and college bowl games. They showed that the congruence between sports and
sponsors is positively associated with stock price responses.
In addition to the aforementioned prior studies that use US data, recent studies provide empirical evidence based on
international data. Among them, Cobbs et al. (2012) focused on market reactions to 73 Formula One (F1) sponsorship
announcements in 2007 made by companies in seven countries. They found that, on average, negative reactions are
intensified by investment level and national congruence. Abril et al. (2016) examined the effects of announcements for the
four global sport tournaments on the stock prices of 98 sponsors in 15 countries between 1998 and 2009 and showed that
overall positive reactions tend to decrease over time.
With the exception of Clark et al. (2009), the aforementioned studies are based on relatively small samples (less than
100). More recent studies have undertaken event analysis using larger samples representing multiple countries. Reiser,
Breuer, and Wicker (2012) analyzed stock price responses to 629 global sponsorships collected through The World
Sponsorship Monitor and the results show that while sport sponsorship announcements generally have positive effects on
stock prices, these effects differ by sport and region. Mazodier and Rezaee (2013) examined market reactions to
293 sponsorship announcements by firms across 24 countries through BrandRapport France and find negative results overall.
They also showed that the negative results are mitigated for philanthropic sponsorships but are intensified by US sponsors.
In sum, prior studies on the relationship between stock prices and sponsorship announcements provide mixed results.
In particular, recent empirical studies using international data demonstrate negative or insignificant market reactions to
sport sponsorships (Cobbs et al., 2012; Mazodier & Rezaee, 2013) or declining market responses over time (Abril et al.,
2016). Thus, whether sport sponsorships have positive effects on the values of sponsors’ firms remains an empirical
question. Further, no prior study has performed statistical analysis on the effect of sport sponsorship on rival firms using
financial data. To address this gap, we investigate the effects of sport sponsorship on sponsors and their rivals. The next
section provides theoretical and empirical perspectives on the effects of sponsorship investment on rivals and develops
hypotheses.

3. Theoretical explanation and hypotheses development

3.1. Theoretical explanation on the effect of sponsorship investments on rivals

Theoretically, the effect of sponsorship investments on rivals can be analyzed using simple oligopolistic competition
models (Bulow, Geanakoplos, & Klemperer, 1985; Fudenberg & Tirole, 1984). Whether the effects on rivals are positive or
negative typically depend on two factors, that is, whether the demand curve has an upward or downward slope (or two firms
competing in quantity or price) and if sponsorship investments have industry “spillover effects.” When firms compete in
quantity, they face a downward-sloping demand curve, while and an upward-sloping one when firms compete on price. To
elaborate, there are three cases presented below: (a) oligopolistic quantity competition model without spillover effects,
(b) oligopolistic quantity competition model with spillover effects, and (c) oligopolistic price competition model.
First, for simplicity, consider the Cournot duopoly model in which two firms (Firm A and B) compete with each other in
quantity. Suppose sponsorship investments by Firm A increase demand for its goods and shift reaction function to the right,
resulting in increased production of Firm A’s goods (Fig. 2). Because Firm B’s goods are strategic substitutes in quantity
competition, Firm B chooses to reduce its production. Thus, in the Cournot quantity competition, sponsorship investments
benefit Firm A but damage Firm B.
 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413 405

Fig. 2. Oligopolistic quantity competition model without spillover effects.

qi (i = A, B) denotes the quantity of goods produced by Firm i; Ri is the reaction function; C1 is the Cournot–Nash equilibrium prior to sponsorship
investments; and C2 is the equilibrium after sponsorship investments.

However, the opposite holds true when sponsorship investments have industry spillover effects or if two oligopolies
compete in price. Consider the case in which sponsorship investments by Firm A can increase demand for both firms’ goods.
Such spillover effects of sponsorships can move Firm B’s reaction function to the right, resulting in increased production by
Firm B (Fig. 3). In addition, if two oligopolies compete in price for differentiated goods, sponsorship investments by Firm A
increase demand for its goods and shift its reaction function upward, resulting in the increased price of Firm A’s goods.
Because Firm B’s goods are strategic complements in price competition, it chooses to increase the price of its product (Fig. 4).

3.2. Effect of sport sponsorship on rivals

Since theoretical outcomes depend on the models’ conditions, we can conclude that whether sponsorship investments
benefit or damage rival firms should be left as an empirical question. As no previous studies on sport sponsorships examine
the effect of sport sponsorship announcements on the stock prices of rival firms, we review the literature in a related area. In
particular, a stream of research has investigated the spillover effects of advertising, another popular promotional activity,
providing mixed results (refer to Bagwell (2007) for a summary of earlier studies).
In the pharmaceutical industry, Fischer and Albers (2010) reported smaller spillover effects of direct-to-consumer
advertising when compared to physician-oriented detailing advertising, while Shapiro (2018) documented positive
spillovers due to television advertising. Anderson and Simester (2013) ran a field experiment to find a positive spillover effect
on the sale of a private-label apparel for which switching to rivals may be expensive. Sahni (2016) reported positive spillovers
of online advertisements by using data from field experiments conducted on a restaurant-search website. The positive
spillovers are concentrated on restaurants that serve the same cuisine as the advertisers and have a high rating. He also found
that spillovers are negatively associated with the intensity of the advertising effort.

Fig. 3. Oligopolistic quantity competition model with spillover effects.

qi (i = A, B) is the quantity of goods produced by Firm i; Ri is the reaction function; C1 is the Cournot–Nash equilibrium prior to sponsorship investments; and
C2 is the equilibrium after sponsorship investments.
406 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

Fig. 4. Oligopolistic price competition model.

pi (i = A, B) is the price of goods produced by Firm i; Ri is the reaction function; B1 is the Nash equilibrium prior to sponsorship investments; and B2 is the
equilibrium after sponsorship investments.

Although Bagwell (2007) concluded that the spillover effect of advertising is difficult to determine and may vary across
industries, several recent studies find the evidence of positive spillovers on rivals through advertisements on the Internet
and televisions. Such spillovers through the media can improve consumers’ recognition of sponsors’ products and services as
well as enable them to access those of the rivals easily (Nakata, 2011).
We consider the possibility that the industry spillover effects can be generated via ambush marketing by rival firms, as
consumers are less accurate when it comes to recalling sponsors; thus, ambushers benefit when consumers mistakenly
believe that they are sponsors (Sandler & Shani, 1989). For example, Under Armor successfully associated itself with Team
USA Women’s Gymnastics during the 2016 Rio Olympics whose official sponsor was Nike.1 Although Burton and Chadwick
(2017) reported that the prevalence of ambush marketing continues to grow and take various forms in the western
markets, few studies have reported on Japanese ambushers. Thus, we believe that industry spillover effects can be
generated via ambush marketing in the western markets but are less likely in the Japanese markets. The next subsection
develops hypotheses on the relationship between sport sponsorship announcements and stock prices for sponsors and
their rivals.

3.3. Hypotheses development

Among the four existing studies using international data, two studies show that stock prices react positively to sport
sponsorship announcements (Abril et al., 2016; Reiser et al., 2012), while the other two present negative or insignificant
results (Cobbs et al., 2012; Mazodier & Rezaee, 2013). However, Cobbs et al. (2012) focused on Formula 1 and Mazodier and
Rezaee (2013) employed data for one year, 2010. Compared with these studies, we cover a wider variety of sport sponsorship
announcements over a longer period. Following Reiser et al. (2012) and Abril et al. (2016), we predict that, on average, sport
sponsorship announcements are received favorably and have a positive effect on firm value.
Hypothesis 1. Stock prices react positively to sport sponsorship announcements.
Sponsored parties range from specific teams and players to entire leagues, games, and naming rights and the effects of
sponsorships appear to differ by the type of sponsored party. If a firm sponsors entire sport leagues, games, or naming rights,
sport fans are likely to look at this more favorably. Instead, if a firm sponsors Team A or Player B, fans of all the teams other
than A or players other than B might be annoyed or upset. Several studies suggest that the sponsorship of individual entities,
such as teams or players as opposed to leagues, games, or naming rights, may induce negative image transfer from these
entities to the sponsor’s brands, thus eroding firm value (Bergkvist, 2012; Hickman & Lawrence, 2010). Such a negative image
transfer occurs when fans of a given team or player strongly dislike rival teams or players and project this negative effect
onto the rivals’ sponsors. The findings of these studies further suggest that sponsors may reap fewer benefits from the
sponsorships of a specific team or player than from those of entire leagues, games, or naming rights. Thus, we develop the
following hypotheses for the relationship between market reactions and sponsored parties:
Hypothesis 2a. Stock price responses are more positive when the sponsored party is a sport league, game, or naming right
than otherwise.

1
The Daily Mail on August 12, 2016, available at http://www.dailymail.co.uk/news/article-3735355/How-Armour-outsmarting-Olympics-strict-
advertising-rules-reaping-rewards-Phelps-USA-gymnastics-team.html.
 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413 407

Hypothesis 2b. Stock price responses are more negative when the sponsored party is a specific team or player than
otherwise.
To explain consumer perception of sponsorships, recent studies frequently apply theories underpinning studies on the
concept of matching, congruence, fit, relatedness, or similarity between the sponsor and sponsored (Yamaguchi, 2015). In
line with these studies, several scholars have focused on the influence of national congruence between the sponsor and the
sponsored party on the impact of sport sponsorship. Among studies using international data, Abril et al. (2016) showed that
local sponsors intensify positive market reactions to sport sponsorship announcements; these results are consistent with
those of Reiser et al. (2012); that is, international sponsorship negatively affects stock price responses in the case of soccer
and motor sports. An exception is Cobbs et al. (2012), who reported that the national congruence enhances the probability of
negative market responses to F1 sponsorship announcements. Since our samples include a greater variety of sport
sponsorships, we follow Reiser et al. (2012) and Abril et al. (2016)’s results on the impact of multiple sport sponsorships.
Accordingly, the third hypothesis on national congruence is as follows:
Hypothesis 3. The stock price responses of Japanese sponsors are more positive when the sponsored parties are Japanese
than otherwise.
Studies have reported that the strength of image transfer from sporting events to a company brand is enhanced when the
sponsored partyand the sponsor’s brand match at a functional level (Gwinner & Eaton,1999). In other words, functional congruence
between the sponsors and sponsored is likely to enhance firmvalue reflected in sponsors’ stock prices. Abril et al. (2016) empirically
evidenced that the congruence of sport and sponsors is positivelyassociated with market reactions to sponsorship announcements.
In contrast, Cobbs et al. (2012) and Mazodier and Rezaee (2013) reported that functional congruence does not significantly correlate
with market reactions. Comparatively, the present study covers a greater variety of sport sponsorships and for longer periods. Thus,
we consider the functional congruence of sports and sponsors, when sponsors are primarily engaged in the sports business. Then
we follow Abril et al. (2016) to set the hypothesis consistent with functional congruence theories:
Hypothesis 4. Stock price responses are more positive when sponsors’ primary business involves sports than otherwise.
Sport sponsorships entail costs such as the recently escalating sponsorship fees. Many studies report a trend of soaring
sponsorship fees in accordance with the growth of the sponsorship market (Clark et al., 2009; Davis, 1996; Sandler & Shani,
1989). For example, the base price for a four-year Olympics sponsorship has been reported to exceed $200 million (Boudway,
2017). Despite the escalating sponsorship fees, official sponsors face numerous regulations and limitations during the
Olympic Games. Thus, there is little reason to believe that the effectiveness of sport sponsorships grows in line with its price.
Instead, investors may expect future cash flows from sport sponsorships to decrease over time. Consistent with these
arguments, recent empirical studies demonstrate negative or insignificant market reactions to sport sponsorships (Clark
et al., 2009; Cobbs et al., 2012; Mazodier & Rezaee, 2013) or declining market responses over time (Abril et al., 2016). Against
this backdrop, we develop the following hypothesis:
Hypothesis 5. Stock price responses to more recent announcements are more negative than reactions to early
announcements.
Finally, we hypothesize the effect of sport sponsorship announcements on the stock prices of rival firms. As discussed
above, economic theory suggests that whether sponsorship investments benefit or damage rival firms depends on conditions
such as industry spillover effects and slope of the demand curve. If sponsors succeed in increasing demand for their goods or
services through sport sponsorships, rival firms will experience decreased future cash flows due to losing their customers to
the sponsors. However, if sponsorship investments have industry spillover effects and increase demand for goods and
services of both sponsors and rivals, rival firms are likely to enhance future cash flows.
Although prior studies on sport sponsorships do not examine the effects of sport sponsorship announcements on the
stock prices of rival firms, as discussed above, a stream of research has investigated the spillover effects of advertising,
another popular promotional activity, providing mixed results (Bagwell, 2007). However, several recent studies find
evidence of positive spillovers on rivals through advertisements on the Internet and television, which improve consumers’
recognition of sponsors’ products and services as well as enable them to access those of the rivals (Nakata, 2011). Thus, we set
the following hypothesis on the effects of sport sponsorships on the stock prices of rival firms:
Hypothesis 6. Stock prices react positively to sponsorship announcements of rivals.

4. Method

4.1. Data

We source articles on sport sponsorship published in The Nikkei,Nikkei Business Daily, and Nikkei MJ between April
1991 and March 2014 using Nikkei Telecom, a database widely used to search for articles in Japanese newspapers and business
magazines. We select articles published in the national editions of these newspapers to focus on large-scale sporting events
and excluded the smaller ones reported in local editions. Among the prior studies on sport sponsorship in the United States,
Mishra, Bobinski, and Bhabra (1997) also selected articles published in the national edition of The Wall Street Journal.
408 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

The keyword “sponsor” produces 10,238 articles, of which 363 articles are related to sport sponsorship. We adopt the
following sample selection process. First, we eliminate 29 articles that report the same news as those published in previous
articles and 66 more that repeat the previously reported news. Further, 15 articles that are not based on facts are eliminated,
followed by an additional 72 articles reporting the sport sponsorship of companies not listed on the first section of the Tokyo
Stock Exchange (TSE). Finally, we recount 12 articles that report the sport sponsorship of multiple companies. The sample
selection process produces 193 sport sponsorship announcements.
Next, we select control firms that are considered rivals of the sample sponsors. That is, control companies are “similar” to
sample companies, but do not sponsor the same client. Barber and Lyon (1996) proposed the selection of control firms that
belong to the same industry and have a similar value of assets and return on assets (ROA) as sample firms. More recently, Lie
(2001) added ROA change amount and market-to-book ratio of the year prior to the event and recommended the selection of
control firms using five selection criteria. In the present study, to incorporate the elements of the industry and firm size, we
quantitatively select companies whose share is closest to that of the leading product using market share data published by
Yano Research Institute Ltd. Matched control firms are not found for three firms, and, thus, the number of firms in the
matched sample is 188.
The sponsored parties are classified according to the following categories: 64 announcements for sporting teams; 25 for
individual players; 31 for sporting leagues; 64 for sporting games such as the Olympic Games, the FIFA World Cup, and
Formula 1; and 4 for naming rights of stadiums. Among the 25 announcements whose sponsored parties are individual
players, 18 announcements are for Japanese players, while 7 announcements are for foreigners. Moreover, 9 announcements
are for golfers, 4 for tennis players, 3 for skaters, 3 for skiers, 2 for boxers, 2 for soccer players, and 2 for marathon runners.
From the 64 sponsorship announcements whose sponsored parties are sporting teams, 38 announcements are for Japanese
teams and 26 for foreign teams. The former includes 3 announcements for national representative rugby teams, and 35 for
private teams. Note that these 35 announcements comprise 13 for the auto-racing teams, 12 for soccer, 7 for baseball, 2 for
American football, and 1 for the volleyball team. Furthermore, stock companies whose shareholders are different from the
sponsors themselves manage the sponsored soccer2 and baseball teams3 . In addition, the 26 announcements for foreign
teams include 12 for soccer, 11 for auto-racing, 1 for baseball, 1 for cycling, and 1 for the swimming team.

4.2. Event study methodology

To test Hypotheses 1–6, we estimate market reactions to sport sponsorship announcements using the event study
methodology. While prior studies employ a simple market model, this analysis adopts the Fama–French three-factor model
(Fama & French,1993), which adeptly explains the movements of Japanese stock prices, as shown by Kubota and Takehara (2010).
Denoting t1 and t2 as the beginning and end of the event window, we set two event windows, (t1, t2) = (0, 0) and (0, 1),
around the event day in which the sample firm announced its sport sponsorship. Focusing on short event windows is
considered effective to avoid possible effects from other news. Denoting t3 and t4 as the beginning and end of the estimation
window, we set (t3, t4) = ( 160, 10) before the event day. Since a couple of firms’ event window and an estimation window
overlapped, for such firms, we include a dummy variable that takes the value of 1 if a different sponsorship agreement is
announced during the estimation window.
For each firm i, we estimate Ri-Rf in the estimation window, where Ri is the return on stock prices of sponsors and their
rivals, which is calculated from the adjusted daily closing prices retrieved from Yahoo! Finance, Japan. Rf is a risk-free rate,
which is calculated using the yields for the 10-year Japanese government bonds. The independent variables include Rm-Rf,
SMB, HML, and the event dummy variable. Rm is the market return, which is calculated from stock returns of all the firms
listed on the first and second sections of the TSE. SMB and HML factors are based on Kubota and Takehara (2010) and
calculated by Financial Data Solutions, Inc.
Using the estimated coefficients, we calculate the abnormal return (AR). The cumulative abnormal return (CAR) and
standardized CAR (SCAR) are then obtained by summing the abnormal returns over the event window. Then, mean CAR and
SCAR (CAAR and SCAAR) are calculated for each sub-sample. We test the null hypothesis, H0: CAAR (SCAAR) = 0, i.e., stock prices
do not respond to sport sponsorship announcements, by assuming that the two test statistics, J1 and J2, are normally
distributed. This analysis is used to test H1 and H6 for sponsors and their rivals.

4.3. Multivariate regression analysis

To examine factors associated with stock price responses to sport sponsorship announcements of sponsors, we conduct a
least squares regression to estimate the CAR using independent variables that are related to Hypotheses 2–5. First, we

2
There are 10 sponsored soccer teams (sponsors and their major shareholders): Hokkaido Consadole Sapporo (Sumitomo and Ishiya), Yokohama F.
Marinos (Sanyo Shokai/Mizuno and Nissan), Urawa Red Diamonds (Meiji Seika/Sega and Diamonds F. C. Partners), Gamba Osaka (Hankyu Hanshin and
Panasonic), F. C. Tokyo (Sanyo Shokai and Tokyo Gas), Tokyo Verdy (Konami and Buddy), Shonan Bellmare (HOYA and Sanei Archtecture Planning), Kashima
Antlers (LIXIL and Nippon Steel & Sumitomo Metal), Yokohama Flügels (Bandai and ANA), and Shimizu S-PULSE (Ezaki Glico and Suzuyo).
3
There are four sponsored baseball teams (their sponsors and their major shareholders): Saitama Seibu Lions (DIP and Seibu Railway), Tokyo Yakult
Swallow (Uniden/Kakaku.com and Yakult), Tohoku Rakuten Golden Eagles (Takara/Prima Meat Packers and Rakuten), and Osaka Kintetsu Buffaloes (Acom/
C&S and Kintetsu Railway).
 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413 409

employ dummy variables that represent the sponsored parties League, Team, and Player, which take the value of 1 if a league,
game, naming right, team, and player are sponsored and 0 otherwise. League is included to test Hypothesis 2a and is expected
to have a positive sign. Team and Player are included to test Hypothesis 2b and are expected to have negative signs.
To test Hypotheses 3–5, we include the variables National Congruence, Functional Congruence, and Year, respectively.
National Congruence takes the value of 1 if the sponsored party is Japanese and 0 otherwise. Functional Congruence is valued
at 1 if the sponsors are engaged in sports business and 0 otherwise. In particular, we select 23 firms that provide uniforms
and goods used in the sporting events for Functional Congruence.4 Year takes the value of 1 if the sport sponsorship was
announced between 2010 and 2014 and 0 otherwise. According to Hypotheses 3–5, we expect positive coefficients for
National Congruence and Functional Congruence; negative coefficients for Year. Moreover, we employ two interaction terms,
National Congruence x Year and Functional Congruence x Year. These two terms are included to examine the incremental
effects of national and functional congruence for stock price reactions between 2010 and 2014.
Renewal takes the value of 1 for the renewal of a sponsorship contract and 0 for a new contract. Two theories predict the
impact. First, the efficient market hypothesis suggests that stock prices react only to new information. If this hypothesis
stands, stock prices react only to the announcements of new contracts, not renewals. By contrast, attention theory in
behavioral finance indicates that renewal of contracts can also capture investors’ attention, prove to investors that contracts
are important, and cause stock price fluctuation, even when it does not contain new information. Thus, whether the contract
type creates a different market reaction remains an empirical question.
Tech is assigned the value of 1 if sponsors are high-tech firms and 0 otherwise. Few studies using US data show enhanced
market responses when sport sponsors are high-tech firms (Clark, Cornwell, & Pruitt, 2002, 2009; Cornwell, Pruitt et al.,
2005). This linkage is based on the argument that high-tech firms derive greater benefits from the signaling effect of sport
sponsorship than other traditional and established firms. This is because the former are relatively young and surrounded by a
poor information environment. Nevertheless, recent studies using international data show that high-tech firms do not affect
market responses to sponsorship announcements (Mazodier & Rezaee, 2013; Reiser et al., 2012). These results suggest that
high-tech firms are well established and no longer need sponsorship announcements to enhance their brand awareness,
image, and loyalty. Thus, whether high-tech firms raise market responses remains an empirical question.
Next, we include the variable Confounding Event which takes the value of 1 if there is important news for rival firms, as
reported by the Nikkei in the event window.5 This variable is included to control for the potential effects of news on rival
firms in the event window. The confounding events include news for rivals’ products or services and columns or personnel
information.
Last, we include two independent variables, ROA and Asset, which represent firm characteristics. Asset is a natural
logarithm of total assets and ROA is return on assets. Asset is a proxy for firm size. Prior studies provide mixed results for the
relationship between market reactions and firm size. For instance, Clark et al. (2009) found a positive correlation between
CARs and sponsor size; Reiser et al. (2012) reported a negative correlation for soccer game sponsorships; Pruitt et al. (2004)
documented an insignificant correlation; and Mishra et al. (1997) showed a positive correlation between market reactions
and ROA for sponsorships in general.

5. Results and discussion

The CAAR and SCAAR of Japanese sponsors and their rivals are presented in Table 2 for the two event windows around the
sport sponsorship announcements during 1991–2014. The CAAR of all sponsors is significantly positive for the two event
windows, while the SCAAR of all rivals is significantly negative. These results are consistent with Hypothesis 1 but not with
Hypothesis 6. The market responses of sponsors indicate that irrespective of the significance, both CAAR and SCAAR are
positive for all categories except the sponsorships for a team or player, foreign sponsored party, and events held between
2010 and 2014.
For sponsored parties, sponsorships for a sport league, game, and naming right have a significantly positive CAAR and
SCAAR for both event windows, while sponsorships for a team or player have insignificant reactions. In terms of national
congruence, sponsorships for foreign-sponsored parties show insignificant but negative reactions for both event windows.
In contrast, sport sponsorships for Japanese sponsored parties show a significantly positive CAAR and SCAAR for both event
windows. As for functional congruence, CAAR is significantly positive in the one-day (0, 0) window when sponsors’ primary
business involves sports. Regarding the year effects, both CAAR and SCAAR decrease over time. More specifically, both CAAR
and SCAAR are significantly negative in the two-day (0, 1) window during 2010–2014, while both CAAR and SCAAR are
significantly positive in the two-day (0, 1) window during 1991–1999.
The results of the multivariate regressions are presented in Table 3. For all models, the coefficients of League are
significantly positive at the 5% level, while those of Year are significantly negative at the 1% level. These results are consistent
with H2a and H5, indicating that responses of stock prices tend to be more positive when the entire league, game, and
naming right are sponsored but tend to be more negative when the events are held between 2010 and 2014. Note that

4
This selection process may be strict since we exclude Konami, a company that operates a wide range of business activities, including health and fitness
clubs.
5
We use Nikkei Telecom to search for news on control firms.
410 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

Table 2
Market reactions to sports sponsorship announcements for sponsors and rivals.

No. CAAR J1-stat SCAAR J2-stat

All sponsors
Event window (0, 0) 188 0.245 1.734* 0.119 1.615
Event window (0, 1) 188 0.272 1.922* 0.081 1.103
All rivals
Event window (0, 0) 188 0.220 1.600 0.155 2.110**
Event window (0, 1) 188 0.262 1.350 0.239 3.259***

Sponsored party
Team and player
Event window (0, 0) 90 0.065 0.308 0.007 0.062
Event window (0, 1) 90 0.020 0.097 0.036 0.344
League, game, and naming right
Event window (0, 0) 98 0.451 2.329** 0.229 2.251**
Event window (0, 1) 98 0.560 2.901*** 0.183 1.800*

National congruence
Japanese sponsored party
Event window (0, 0) 113 0.445 2.284** 0.239 2.521**
Event window (0, 1) 113 0.489 2.502** 0.187 1.972*
Foreign sponsored party
Event window (0, 0) 75 0.056 0.282 0.062 0.537
Event window (0, 1) 75 0.055 0.279 0.078 0.674

Functional congruence
Sponsors with sports business
Event window (0, 0) 23 0.808 1.859* 0.336 1.602
Event window (0, 1) 23 0.621 1.483 0.303 1.445
Sponsors with other business
Event window (0, 0) 165 0.167 1.117 0.088 1.126
Event window (0, 1) 165 0.223 1.486 0.050 0.638

Year
2010-2014
Event window (0, 0) 34 0.090 0.296 0.060 0.349
Event window (0, 1) 34 0.582 1.907* 0.366 2.118**
2000-2009
Event window (0, 0) 87 0.279 1.282 0.123 1.142
Event window (0, 1) 87 0.399 1.835* 0.111 1.026
1991-1999
Event window (0, 0) 67 0.372 1.602 0.203 1.653*
Event window (0, 1) 67 0.540 2.324** 0.269 2.188**

Note: ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

coefficient of interaction between National Congruence and Year is significantly positive in Model 3. This result indicates that
the incremental influences of national congruence on stock prices of sponsors increased between 2010 and 2014.
In addition, the coefficients of Team, Player, Functional Congruence, Renewal, and Tech are insignificant for all the models.
The results for Team, Player, and Functional Congruence are not consistent with Hypothesis 2b or Hypothesis 4. These results
suggest that investors are indifferent to whether sponsored parties are individual teams or players, and if sponsors’ primary
business involves sports. The results for Renewal and Tech are consistent with previous studies such as Reiser et al. (2012) and
Mazodier and Rezaee (2013). The former result suggests that investors are indifferent to whether sport sponsorships are new
contracts or renewals. The latter result indicates that high-tech firms are well established in Japan and no longer need to
improve their brand awareness, image, and loyalty through sport sponsorships.
To investigate what generates negative market responses of rivals, we consult the existing literature on advertising. First,
Bagwell (2007) discussed that the asymmetric effects of advertising between advertisers and their rivals tend to occur in
mature, established markets with rivals that sell in relatively undifferentiated markets. These arguments suggest that
negative spillovers are more likely to happen in less high-tech industries. This story may be reasonable for the following two
reasons. As shown in Table 2, the number of sponsors that are classified as high-tech industries is only 16. In addition, Table 4
shows that the SCAAR of rivals in other industries is significantly negative in the two-day (0, 1) window.
Second, Elhadj, Lahmandi-Ayed, and Laussel (2014) provided a model that shows the relationship between industry
spillovers and market structure. According to their model, positive spillovers occur when two firms are active in both
advertising and product markets, while negative spillovers happen when one firm advertises but both firms are active in the
product market. Sahni (2016) provided experimental evidence that is consistent with the model provided by Elhadj et al.
(2014), by reporting that spillovers of online advertisements relate negatively to the intensity of the advertising efforts. In
this study, Table 4 shows that one-half of the rival firms are sponsors of other sport-related organizations. Among them,
 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413 411

Table 3
Factors affecting market responses for sponsors.

Model 1 Model 2 Model 3

Variable Coefficient t-Statistic Coefficient t-Statistic Coefficient t-Statistic

Constant 2.335 1.393 2.529 1.676* 2.209 1.529
League 1.173 2.111** 1.122 2.323** 1.080 2.249**
Team 0.034 0.075
Player 0.584 0.998 0.592 1.126 0.665 1.280
National Congruence 0.082 0.194
Functional Congruence 0.668 0.999 0.867 1.540 0.873 1.560
Renewal 0.298 0.397
Tech 0.994 1.493 1.004 1.569 0.962 1.509
Year 1.961 2.695*** 1.875 2.959*** 1.840 2.918***
National Congruece x Year 1.367 1.412 1.327 1.572 1.393 1.680*
Functtional Congruence x Year 0.754 0.570
Confounding Event 0.488 1.244 0.496 1.321 0.483 1.292
Asset 0.172 1.501 0.185 1.685* 0.166 1.551
ROA 0.041 0.863 0.036 0.774

Obs. 187 187 188

Adjusted R-squared 6.7% 8.5% 8.5%
Akaike info criterion 4.671 4.632 4.622
F-statistic 2.025 ** 2.909 *** 3.165 ***

Note: ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

Table 4
Market reactions to sport sponsorship announcements for rival firms.

No. CAAR J1-stat SCAAR J2-stat

All rivals
Event window (0, 0) 188 0.220 1.600 0.155 2.110**
Event window (0, 1) 188 0.262 1.350 0.239 3.259***

Industry
High-tech firms
Event window (0, 0) 16 0.582 1.012 0.310 1.233
Event window (0, 1) 16 0.728 1.266 0.397 1.579
Other firms
Event window (0, 0) 172 0.186 1.326 0.140 1.830
Event window (0, 1) 172 0.219 1.560 0.225 2.925***

Rivals in sponsorship markets

Rivals that are also sponsors
Event window (0, 0) 94 0.264 1.386 0.165 1.585
Event window (0, 1) 94 0.412 2.165** 0.293 2.817***
Rivals that are not sponsors
Event window (0, 0) 94 0.175 0.887 0.145 1.398
Event window (0, 1) 94 0.112 0.565 0.186 1.791

Note: *** and ** indicate statistical significance at the 1% and 5% levels, respectively.

however, only five pairs of sponsors and their rivals have similar clients including F1 racing teams, soccer teams, and official
sponsors of the Olympic Games. This indicates that most of the rival firms do not compete in the sport sponsorship market.
Perhaps, because of this difference, both CAAR and SCAAR of rivals who are also sponsors are significantly negative in the two-
day (0, 1) window.

6. Concluding remarks

This study investigates whether and how sport sponsorships announced by Japanese-listed firms between 1991 and
2014 affect the stock prices of sponsors and their rivals using the event study methodology. This study, to the best of our
knowledge, is the first to analyze the effects of sport sponsorship on rival firms using financial data. In addition, a unique
feature is its focus on market reactions to sport sponsorship announcements in Japan, which will host major sporting events
in the near future.
The results reveal significantly positive average market reactions to sport sponsorship announcements for sponsors,
while significantly negative reactions for rivals in Japan. This gap in market reactions between sponsors and rivals suggests
that sport sponsorships may be effective in attracting more customers away from rival firms in Japan. Further, market
412 Y. Hino, F. Takeda / Sport Management Review 23 (2020) 401–413

reactions for sponsors are significantly more negative in the case of events held in recent years. These results are consistent
with those of prior studies using international data to demonstrate negative market reactions to sport sponsorships or
declining market responses over time, possibly owing to growing sponsorship fees (Abril et al., 2016; Cobbs et al., 2012;
Mazodier & Rezaee, 2013). In addition, market reactions for sponsors are significantly more positive if the sponsored party is
Japanese, which is in line with research that suggests positive market reactions are associated with national congruence
(Abril et al., 2016; Reiser et al., 2012).
To determine factors that cause negative spillovers of sport sponsorship on rival firms, we examine two possible reasons
discussed by prior studies on advertising. Our data is consistent with the notion that negative spillovers are observed
because most Japanese sponsors and rivals belong to the less high-tech but well-established industries, and that they do not
compete with each other in the sport sponsorship markets.
The results of this study highlight the key elements behind producing successful outcomes in sport sponsorships in Japan,
which is scheduled to host major sporting events such as the Rugby World Cup in 2019 and the 2020 Tokyo Olympic Games.
In addition, the Asia-Pacific region has reported the fastest growing sponsorship expenditure in the world (Fig. 1). As such,
many opportunities for sponsors and sponsored parties exist in the region. Moreover, East Asian people including Japanese
may not react to sport sponsorships in the same way as western people because they are not motivated to process
incongruent information in the same way (Aaker & Sengupta, 2000). Thus, analyzing Japanese sport sponsorship markets
will be useful for both researchers and sponsors/sponsees.
Our results show that sponsors can build competitive advantage over their rivals through sport sponsorships because
such sponsorships enhance brand image, which ultimately entices customers from rivals. The positive effects of sport
sponsorship are also intensified when the sponsored party is a sport league, game, or naming rights and, in recent years,
when it is Japanese. Revealing these factors is particularly important for sponsors because the rapidly rising sponsor fees
have been diminishing the positive impacts of sport sponsorship.
Notwithstanding the contributions, this study is not free from potential limitations. In particular, even though we employ
variables to test our hypotheses, other factors may affect market reactions to announcements of sport sponsorship. For
example, the size of the sponsorship deal may influence the response of stock prices; however, such data cannot be obtained
from our sources, namely newspaper articles. Therefore, future studies are required to provide additional evidence on the
issue when a more comprehensive database on sponsorship is available.

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