Warning Flags on the Race Track

ABSTRACT The globalization of media content has encouraged the growth of cross-cultural promotional channels. Yet, empirical evaluations of advertising strategies at an international level are sparse. This study advances research in this emerging area by analyzing the global financial markets9 valuation of commercial sponsorships in Formula One (F1) motor racing. Although previous research indicated that U.S. markets have approved of similar promotional investments, the results of this international event study demonstrated that the market value of firms entering into F1 sponsorships decline upon announcement. The level of investment and nationality congruence of the sponsorship appear to enhance the probability for negative returns in shareholder value.