Event study analysis of immoral incidents and social activism in athlete endorsement

Purpose: While studies have highlighted the benefits of athlete endorsement as a means of strategic marketing communication and public relations, there are risk factors associated with the practice, especially when a celebrity endorser is involved in immoral incidents or social activism. This study examined the impacts of athlete endorsers’ controversial behavior on sponsors. It scrutinized the change in publicly traded corporations’ shareholder value when their athlete endorsers were implicated in either immoral conduct or social activism. Design/methodology/approach: Using the event study analysis, this study investigated the sponsored corporations’ abnormal returns around athlete endorsers’ involvement in immoral incidents and social activism. Total 34 cases (18 immoral scandals and 16 social activism) were collected from 2009 to 2019. Findings: The data analysis revealed a significant difference in abnormal returns between the two different types of incidents for the four different windows (2, 4, 8 and 15 days) after the date of the focal event. While scandals of immoral conduct did not cause significant loss in shareholder value, cases of social activism showed negative abnormal returns for sponsoring corporations. Originality/value: This study presented the first comparative analysis of how endorsers’ immoral behavior and social activism impacted on the shareholders’ value of sponsoring firms. Using stock performance data, the findings provided the empirical evidence in stock markets’ different reactions regarding scandals and social activism. The study contributes to the relevant body of literature by comparing the different contexts in celebrity endorsement.