Examination of Stock Market Response to Publicity Surrounding Athletic Endorsers

Using event study methodology, this paper examines the stock market response to news events that affect athletic endorsers. The key finding is stock prices are sensitive to events that are either favorable or unfavorable for the reputation of the endorser. This response, while muted by numerous factors, shows that stock market participants expect the events that improve the endorsee’s image to lead to increased future cash flows for the sponsoring firm. Likewise, events that damage the reputation of the endorsee are expected to lead to reduced cash flows for the sponsor. This relationship of cash flows and celebrity image is consistent with the view that semantic networks play an important