Stock market reaction to affiliated sports teams’ performance: evidence from China

Drawing on the affect transfer and stakeholder theories, this study aims to examine how the performance of a sports team that a firm owns or sponsors may affect the firm’s market value. It explicates that a sports team wins (loses) in the field raises the public’s positive (negative) affect, which can spill over to the associated firm.

Based on a sample of publicly listed firms in Chinese stock exchanges that are owners or sponsors of soccer teams that competed in the National soccer league of China during 2004–2017, the authors find good support for the hypotheses.

The findings reveal that a firm’s cumulative abnormal return is positively related to its soccer team’s winning and negatively related to the team’s losing, and these relationships are moderated by both firm and match characteristics. By showing a relationship between sports team’s performance and associated firm’s market value, executives need cautions when their firms want to own or sponsor sports team. However, owned sports team’s winning could be a good strategy to improve a firm’s market value.

This study enriches the spillover literature and deepens the understanding of spillover effect. It provides evidence for the concept of affect transfer and broadens its application scope.