Athlete Endorsement Contracts: The Impact of Conventional Stars

Abstract

Despite a continuing increase in the dollar value of athlete endorsement contracts and the prominence of athlete endorsements as a marketing tool, the value of endorsement contracts has gone largely unexamined. Employing event study analysis, this paper assesses the effects of endorsement contract announcements on changes in the share price of firms. In contrast to previous studies which focus on a single megastar athlete or sporting event and find significant positive returns to the firm, this study evaluates 148 endorsement announcements for conventional athletic stars in various sports and finds that the average endorsement contract has an insignificant impact on the market value of the firm. Also, there is no support of the product–endorser match-up hypotheses but endorsements by golfers do exhibit significant abnormal returns. Copyright International Atlantic Economic Society 2008