Football Transfers – An Event Study on the Stock Market Prices of Kit Manufacturers

Abstract: Background: Football has become more and more commercialized especially during the last two decades. Large corporations as the sport giants’ Adidas, Nike or Puma inject enormous sums of sponsoring funds into football. Sponsorvision estimates that EUR 2.5 billion were spent on sport sponsoring in 2007. Football players’ salaries and transfer sums are becoming excessively high. Is it appreciated and thus seen as a good investment by the kit manufacturers and their sponsored clubs to spend so much money on football players? Problem: Does the transfer of a player to a club in the top five European football leagues affect the sponsoring kit manufacturers’ stock price? Purpose: Our principal objective is to investigate whether the transfer of top football players affect stock market prices of the sponsoring kit manufacturers. Another objective is to point out the driving forces of value of football players as endorsers for the kit manufacturer. Delimitations: The data collected in the thesis is limited to the top 5 European football leagues, namely the German Bundesliga, the British Premier League, the Italian Serie A, the Spanish Primera division, and the French Ligue 1. Additionally, the time period of the player transfers is limited to 1998-2010 and we only focus on the top player transfers, which is EUR 15 million and above, and restrict the transfers to a maximum of 25 per season. Additionally, we focus on the three kit manufacturers’ Adidas, Nike and Puma. Methodology: The study consists of two parts, a literature study and an empirical analysis. In the qualitative part we point out the theoretical foundations of how the stock market value of kit manufacturer companies can be influenced by a player transfer. Whereas in the quantitative study then is sought to verify or reject those theoretical arguments. We use a panel regression event study with the three kit manufacturers’ Adidas, Nike and Puma. Results: The aggregate result, which includes all join transfers, lacks any significant effect. Thus we can on an aggregated level conclude that a player transfer does not have any effect on kit manufacturers’ stock price. However, if we consider the kit manufacturers’ independently we observe a significant effect for almost all of the control variables so the effect is different for the different companies. One argument that strengthens our assumption regarding the mere exposure for same kit manufacturer transfers, the within transfers appear to have a stronger effect than the average transfer. There is a more positive one for Adidas and a more negative one for Nike.