The Effects of Adopting and Discarding Sports Teams on Firm Values: Evidence from Taiwan

This study employs an event study and cross-sectional regression model to investigate stock price performances when companies announce to adopt or discard professional sports teams. The results show that there is a negative impact on the stock price of parent companies after announcing adoption, whereas, a positive impact occurs after announcing discarding. Nevertheless, the effects of adopting and discarding events on stock prices are both negative before announcements. In addition, the relationship between the degree of impact and the price to earnings ratio is negative—that is, the stock price of a lower profitability company will drop more when the event happens. Therefore, although many companies increase their awareness by adopting sports teams, investors still need to consider cautiously when deciding to make a short-term investment in the sports team’s parent company.