Does Sponsorship Affect Share Price?

Share MarketIt was with some amusement that I read the following article, “The Impact of Sponsorship on Share Price Brand Value”. The main assertion is that companies that sponsor have better performing share prices than companies that don’t.

On one hand, I can believe that there is a correlation. On the other, I think implying causation could be a long bow to draw.

Sponsorship, and in particular modern, strategic sponsorship, is a powerful marketing tool. Is the correlation in share price performance simply because better, more aggressive, creative, strategic marketers choose sponsorship? In other words, do companies who are better, more strategic marketers have better-performing share prices, and investing in sponsorship is just another symptom of being a great marketer? I have to say, I’m leaning that way.

That said, there is some evidence that sponsorship of mega-events and stadiums does affect share price. There was a study of American stadium naming rights that showed newly announced naming rights sponsors had an average market capitalisation increase of 1.65%, with larger and more sustained gains for sponsors of hometown stadiums and stadiums housing winning teams. The same study asserted that sponsors of top eschelon athletes and mega-events (World Cup, Olympics) also saw a market cap bump at announcement, but it wasn’t as big. It’s also worth noting that there are other studies that show any increase is negligible.

Getting back to the main point, I can absolutely believe that companies with sponsorship portfolios perform better than companies that don’t sponsor. But I think that could be more accurately stated like this:

“Companies that do great marketing perform better in the stock market. Companies that do great marketing also identify and use the power of sponsorship as an important marketing tool.”

Correlation, not causation.

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