Digitized Honors Theses (2002-2017)

Date of Award

5-2004

Document Type

Undergraduate Thesis

Degree Name

BS

Faculty Mentor

James Cannon, Ph.D.

Advisor(s)

Ross Dickens, Ph.D., Natalya Delcoure, Ph.D.

Abstract

Sport sponsorship, particularly the naming of stadiums and events, is one of the fastest growing segments of the marketing industry. While traditional forms of marketing have undergone extensive research, very little research has been done on naming rights. In fact, there is no industry-wide accepted method of sponsorship valuation. This research project explores the effect of the purchase of stadium, arena, and bowl game naming rights on the sponsoring firm's stock price using event study methodology as set forth in Brown and Warner(1985). The study sample includes 44 companies that entered into stadium, arena, or bowl game naming right agreements between 1990 and 2003. Stock price data tests examine the categorical differences of the firms (e.g., facility type, product versus service companies, or Fortune ranking). Results for arenas, product companies, product companies with arena naming rights, and Fortune 1-100 companies can be interpreted as a) companies are not overpaying for the naming rights or b) the announcement is not an economically significant event, especially for large corporations. The results for product companies with bowl game naming rights and Fortune 301-500 companies show negative returns indicating that shareholders believe the event is economically significant and that firms overpaid for the sponsorship. The individually significant tests within the t = -1, t = O, and t = +1 time frame can be interpreted as a) information may have been leaked out over a period of time before the defined event, thereby having no overly significant impact on return values in any subsequent window or day in the study, or b) the announcement is not an economically significant event. This study shows that more often than not the announcement of stadium, arena, or bowl game naming rights has no impact on a firm's stock price on a particular day or for a defined period of time. As long as there is no significant negative change in the stock price, companies should continue to purchase these naming rights to achieve their marketing objectives.

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