Indian premier league (IPL) match victory and sponsors' stock returns

• Published date: 01 February 2022
• Author: Samprita Sen,Parthajit Kayal
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2352

ACADEMIC PAPER

Indian premier league (IPL) match victory and sponsors' stock

returns

Samprita Sen | Parthajit Kayal

Madras School of Economics (MSE), Chennai,

India

Correspondence

Parthajit Kayal, Madras School of Economics

(MSE), Gandhi Mandapam Road, Behind

Government Data Centre, Kottur, Chennai

600025, India

Email: parthajitkayal@gmail.com

This paper attempts to study the impact of Indian Premier League (IPL) match victo-

ries on the stock returns of the playing teams' major sponsors. We hand-collect the

events and sponsorship data for the years 2014–2017 and exploit the event study

method for our analysis. We first compute the abnormal returns and then cross vali-

date using the market model. Further, we estimate the cumulative abnormal returns

to separately examine the impact of popularity matches. Our results suggest that the

overall performance of a team throughout a whole season as well as unlikely wins or

close-finishes tends to have a favorable impact on the sponsors' stock returns.

JEL CLASSIFICATION

G11; G12; G14; G17

1|INTRODUCTION

“Over time, thegame of cricket in India has become morethan a game,

morphing into a symbol of national identity”(Nair, 2011). There are

broadly three formats of the game. “Test matches”that are played for

5 days in succession, “One-day”gamesthatlastafulldayand

“Twenty20”that has 20 overs a side. Though purists have always

favored the longer formats of the “gentlemen's game”, new generations

have takenkeenly to the shorterformats of twenty20games. Lalit Modi,

one of the founding figures of the Indian Premier League (IPL), during its

launch opined “The IPL has beendesigned to entice an entire new genera-

tion of sports fans into the grounds throughout the country. The dynamic

Twenty20format has been designedto attract a youngfan base, which also

includes women and children.”IPL has been successful in achieving

viewers' participation and engagement on an unprecedented scale.

Hence, it is hardly surprising that the 2 months of IPL every year

(April–May) constitute an important window in International Cricket

Council (ICC) Calendar and hardly any crucial matches are scheduled

during those months. As of 2019, the brand value of IPL stood at ₹475

billion (US$6.7 billion) as reported by Duffand Phelps in 2019.

1

It con-

tributed ₹11.5 billion or US$160 million to the output of the country

within 7 yearsof its inception.

The IPL at its outset was to be held as a round-robin group and

knock out format, with the teams qualifyingtop of the table getting not

one but two qualifying games into thefinale. The major cities to partici-

pate wereBangalore, Chennai,Delhi, Hyderabad,Jaipur, Kolkata, Mohali

and Mumbai. The base value of all the franchises in the first-ever auc-

tion held on August 24, 2008 was estimated at 400 million dollars.

However,the response far exceeded expectations withfranchises being

sold for an approximate of $723.59 million. “With the advent of the IPL,

almost overnight the world's best cricketers—who had seldommade the kind

of money earned by their counterparts in other professional sports—became

millionaires”(Longmore, 2019). In 2008 the media rights were sold for

1 billion USD according to popular reports. “According to the inaugural

annual review of Global Sports Salaries published by sportingintelligence.

com in April 2010, the IPL is the second-highest-paid league in the world

after the National Basketball Association (NBA), based on first-team salaries

on a pro-rata basis”(Kalgotra,Sharda, & Chakraborty, 2013).

The importance of IPL in the minds of cricket fanatics all over the

country could be easily summarized by the association and enthusiasm

it receives from huge corporates, conglomerates, Bollywood an d politi-

cal fraternities. “The IPLBollywood alliance isa new synergistic mechanism

that is likely to attract the attention of global entertainment corporations,

some of which are already present in the Indian commercial entertainment

industry”(Rasul & Proffitt, 2017). Hence, it has emerged as a very

intriguingarea of study. Corporate sponsorshave exploited globalsport-

ing events such as the Olympics by establishing a relationship between

their corporate image and the Olympic ideals of peace and friendship

(Larson & Park, 1993). There exists some literature that studies how

sporting events affect stock markets (Edmans, Garcia, & Norli, 2007).

Investors' sentiments associated with sporting events have also inspired

some research and remain a popular domain of study. There have also

Received: 6 June 2020 Revised: 23 July 2020 Accepted: 1 August 2020

DOI: 10.1002/pa.2352

J Public Affairs. 2022;22:e2352. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of8

https://doi.org/10.1002/pa.2352