Celebrity endorsers' performance on the “ground” and on the “floor”

Abstract

This article analyzes the relationship between two types of performances, one on the ground (of a tennis court) and the other on the floor (of the stock market). The empirical application looks into the tennis player, Rafael Nadal, and his endorsing firms. The findings show a positive reaction in the market value when the tennis player wins matches in the Grand Slams, the intriguing effect being the diminishing sensitivity pattern that such reaction shows and the absence of loss aversion.

The value of winning: endorsement returns in individual sports

“…Despite some likely exposure for runners-up during the event, as well as some media coverage ex post, the endorsed firm's shares did not exhibit significant returns, neither on a market-adjusted basis nor on a risk-adjusted basis. These findings are in line with those of Nicolau and Santa-María (2013). Ngan et al (2011) experimentally studied purchase intentions for endorsed brands for sports teams and found that winning (as opposed to losing) an event leads to the strongest purchase intentions.…”

“…We make a distinction between returns for endorsed clothing brands and equipment brands. Compared to previous research (e.g., Farrell et al 2000;Nicolau and Santa-María 2013), one of our contributions is the inclusion of non-superstars. We defined a superstar based on the world ranking in the week previous to the start of the tournament.…”

“…Farrell et al (2000) found significant positive abnormal returns for Nike only, which was attributed to the visibility of the brand during golf tournaments. Nicolau and Santa-María (2013) focused on tennis. They studied the performance of Rafael Nadal alongside the stock returns of the endorsed firms.…”

“…Farrell et al (2000) and Nicolau and Santa-María (2013), for example, studied only one athlete in relation to the brands endorsed. Results of these studies can thus not per se be generalized.…”

“…What is the effect on stock returns for brands endorsed by runners-up? Nicolau and Santa-María (2013) found for Rafael Nadal's sponsors that a loss did not have an effect on their share price, which they attributed to the fact that, although undesirable, losing is Bpart of the game^ (Nicolau and Santa-María, 2013: 147). By studying a large sample of runners-up across different sports, we show whether Bbeing in the tournament^for a long time conveys any positive brand effects.…”