Professional league team naming and firm value: evidence from China

Research question: Prior research on the value of sponsorship for companies yields mixed evidence. While many studies focus on naming rights for sport venues, few have explored the impact of naming rights for professional league teams on firm value. This paper addresses this gap by examining the short–and long-term effects of corporate naming of professional league teams in China on firm value. Research methods: We employ ordinary least squares (OLS) and instrumental variable (IV) regressions in our empirical analyses. Our sample includes 41 listed firms from China’s A-shares, the Heng Sang Index, the New York Stock Exchange, and Nasdaq, each of which sponsored a team in a Chinese professional sport league. Results and Findings: In the short term, naming a league team has a negative impact on firm value, as indicated by significantly negative cumulative abnormal returns. In the long term, however, naming sponsorship is associated with a positive effect on firm value, reflected in an increase in Tobin’s Q. These findings remain robust after addressing endogeneity concerns through instrumental variable and matching techniques. Implications: Our findings suggest that increased sponsorship spending does not automatically translate into better firm performance. Companies should regularly and carefully assess the cost-effectiveness and strategic value of such investments. Realizing long-term benefits from naming sponsorships requires consistency, planning, and alignment with the team’s development. Firms should approach sponsorship decisions with a long-term perspective and be prepared for sustained engagement to enhance firm value effectively.