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theses

This dissertation examines the financial market response to athlete endorsements. This popular marketing strategy comes at a high cost. The increasing costs of athlete endorsements constitute a large portion of firms' advertising budget. With such large expenditures by marketing strategists, it would be in their best interest to examine if the return is worth the investment, as marketers increasingly face pressure to communicate to top management the financial values that their marketing activities generate. The financial value of marketing activities has received increasing interest in the marketing literature in recent years. However, the results have been largely mixed. Using a sample of 130 athlete endorsements of products of publicly traded firms over the period from 2003-2016, this dissertation employs an event data analysis to study the effect of athlete endorsements on firm performance. More specifically, the objective of the dissertation is to assess the profitability of using athlete endorsers as an advertising strategy by examining what role that the three elements, i.e. the endorser, the product, and the firm have in determining the effect of the endorsement announcement on firm value. I present empirical evidence that shows that the stock market, on average, rewards firms that engage in endorsement deals. Likewise, the market highly rewards firms who associate their brands with endorsers of a higher stature. Additionally, the findings of this study indicate that athletes with multiple endorsements have a different effect on the investors’ reactions to endorsement announcements. Further examination reveals that this variable has an inverted U-shaped effect on firm value. Also, I find that investors react stronger to endorsements of athletes who play individual sports compared to those who play team sports. Another variable of interest in this dissertation is the gender of the endorser. Empirical results show that investors react stronger to an endorsement by a female athlete than an endorsement by a male athlete. This is noteworthy, since firms overwhelmingly sponsor men’s sports in much higher numbers and with much larger sponsorship deals compared to women’s sports. Another variable I explore, which is largely overlooked in the literature, is age of the endorser. Results show that the financial market reacts more positively to endorsement deals of younger athletes than older athletes. More interestingly, further examination shows that younger female endorsers have a larger impact on firm value than younger male endorsers. Finally, I find that the endorsement of sport-related products have a larger positive impact on firm value than the endorsement of products unrelated to sports, which lends support for the match-up hypothesis. The conclusions in this dissertation offer valuable managerial strategies for increasing firm value through athlete endorsements.

ETD_8953

Ph.D.

Includes bibliographical references

by Rayed Moneer Alotaibi

doi:10.7282/T3CC143P

ETD doctoral

The author owns the copyright to this work.