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Shareholders’ reaction to ethical image of sports teams: an event study in the Indian Premier League

Author

Listed:
  • Saravana Jaikumar

    (Indian Institute of Management Calcutta)

  • Viswanath Pingali

    (Indian Institute of Management Ahmedabad)

  • Vineet Virmani

    (Indian Institute of Management Ahmedabad)

Abstract

Using event study analysis on a sports team and parent firm in the Indian Premier League, we show that investors react adversely to: (1) unethical but legal activity that may have a positive impact on the firm’s value and (2) unethical and illegal activity that does not necessarily impact the day-to-day performance of the firm. We use the novel sample-quantiles test to analyze the events in a ‘single-firm single-event’ context. Results suggest that investors are sensitive to and care about the ethical image of the sports team and parent firm. Further, when the parent firm’s core function is unrelated to the sport, the performance of the team may not have a significant impact on the firm’s valuation. We also make a broader contribution wherein we provide direct evidence linking unethical activities with negative valuation, while ruling out the rent-seeking explanation.

Suggested Citation

  • Saravana Jaikumar & Viswanath Pingali & Vineet Virmani, 2019. "Shareholders’ reaction to ethical image of sports teams: an event study in the Indian Premier League," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(4), pages 283-300, December.
    • Handle: RePEc:spr:decisn:v:46:y:2019:i:4:d:10.1007_s40622-019-00230-9
    DOI: 10.1007/s40622-019-00230-9
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