The Value of Olympic Sponsorships: Who is Capturing the Gold?

Abstract

In recent years, corporate sponsorship has become an increasingly important element of the marketing communications mix. This paper uses data from the 1996 Atlanta Summer Olympic Games to measure the value of Olympic sponsorship. Using stock return data, we find that the shareholders of sponsoring firms earn negative average abnormal returns around announcement of Olympic sponsorship agreements. This finding, consistent with an agency cost explanation of corporate investment practices, is robust to variation in a number of firm- and sponsorship-specific variables. In addition, cross-sectional analysis supports the monitoring hypothesis, as significant equity ownership by institutional investors is positively related to abnormal returns around announcement. Our results suggest that utilizing Olympic sponsorships in the marketing communications mix may not be value-enhancing.

Keywords: event study, sponsorship, olympics, communications mix, agency theory

JEL Classification: G14, G30