The power of sponsorship announcements: Drivers of brand strength and stock market returns

Firms increasingly use sponsorship announcements as strategic communication events that potentially influence consumer-based brand strength as well as investor behavior. However, most prior research relies on one-time surveys or experiments, which limits understanding of how sponsorship announcements affect brands over time. To address this gap, we develop a novel empirical approach that models how a sponsor's structural sponsorship characteristics disclosed in the announcement (e.g., sponsorship duration), announcement message design (e.g., writing style), and communication activation (e.g., generated news media coverage) shape brand strength. Using an error correction model and daily brand observations linked to 566 sponsorship announcements over 11 years, we identify the key drivers of brand strength following sponsorship announcements.

The results show that brand strength increases by about 10% when firms announce long-lasting sponsorships of events, while simultaneously employing rich message features and generating news media coverage (approximately the 75th percentile of observed cases). Sponsorship announcements involving celebrities further strengthen brand perceptions, whereas team sponsorship announcements can backfire and lead to significant declines in brand strength. Importantly, these gains and losses are economically meaningful and translate into changes in firm value of up to USD 205 million in market capitalization. These findings provide actionable guidance for managers on how to design and communicate sponsorship announcements to maximize both brand-building and financial returns.