Athens’ Olympic Games 2004 impact on sponsors’ stock returns

Abstract

The sponsorship of major sporting events involves an ongoing commitment by business partners (sponsors) who need to evaluate the returns of their investments. This article addresses this evaluation by employing event study analysis and bootstrapping in order to assess the market value of business sponsorship of the Olympic Games 2004. The events tested are the announcement of the Athens 2004 Olympic Games sponsorships and the opening ceremony. The empirical results indicate the marginal positive impact that sponsorship announcements cause in international and national sponsors’ stock returns. Sponsorship announcements are more influential for small size firms’ stock returns since they react more positive compared to larger ones.

Notes

¹ Visa International is not listed and therefore was excluded from our sample.

² Early event studies are primarily concerned with the impact of firm-specific events on stock returns. Blinder (1998) provides an excellent survey of the literature on firm-specific event studies. Since 1980s, developments of event study methodology extend to the investigation of merger and acquisitions (e.g. Lepetit et al., 2004) and multivariate events, such as regulatory initiatives (e.g. Sawkins, 1995; Dnes and Seaton, 1999).

³ In order to capture the effects of the ‘events’, some macro-economic variables could be incorporated in the market model, especially for the Greek sponsoring firms. However, we choose to use the market model that incorporates stock market behaviour (as reflected by stock indices), following several papers investigating different types of firm-specific events, including major sporting ones.

⁴ We have also used the Seemingly Unrelated Regression Equations (SURE) method, which estimates the parameters of a system, accounting for heteroskedasticity and contemporaneous correlation in the errors across equations. This method produced the same results with the OLS. Results are available from the authors upon request.

⁵ In the interests of brevity, all stationarity and diagnostic tests’ results are not presented here. Results are available from the authors on request.