Effects of Official Sports Sponsorship on Firm Market Liquidity and Risk

Although there has been an increased interest in the connection between marketing expenditures and its contribution to strengthening firm financial metrics, there are few studies examining the changes to those firm financial metrics following firm adoption of a specific marketing strategy, in this case, firm adoption of an official sports sponsorship. Investments in official sports sponsorships are decidedly strategic activities that require the utilization of firm financial and human resources in an environment that is external to the firm.As explained by Srivastava, Shervani, and Fahey (1998), market-based assets arise from the commingling of firm resources with entities external to the firm, in the context of this study, official sports sponsorships serve as the tool by which firms interact with their external environment, which have the potential to create market-based assets, which are hypothesized to contribute to firm financial success. This proposition was tested in a series of two essays in this dissertation.In the first essay, I examined the effects of the adoption of an official sports sponsorship on firm market liquidity, finding that firms who adopted official sports sponsorships experienced improvements in firm market liquidity for the time period examined.Also, a noteworthy finding was that firms with relatively lower levels of advertising intensity experienced better returns to firm market liquidity than for firms with relatively higher levels of advertising intensity. This essay provides initial support for the contention that firm investments in official sports sponsorships may contribute to the creation of market-based assets, leading to improvements in firm financial metrics. The second essay examined the influence of adoption of official sports sponsorships on firm risk. Findings support the idea that firm investment in a strategic marketing initiative, official sports sponsorships, may contribute to the process of creation of market-based assets, leading to improvements in the financial measure of risk. Also, the essay found that firms with relatively lower levels of advertising intensity experienced better returns to firm risk than for firms with relatively higher levels of advertising intensity.Overall, the contribution of this dissertation is that firm investment in a strategic marketing investment, official sports sponsorship, may have the potential to create market-based assets, which could provide improvements to firm financial metrics. Implications for theory and managers are also discussed