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INTRODUCTIONREVIEW OF

LITERATUREOBJECTIVES METHODOLOGY ANALYSIS CONCLUSIONS

Diksha Kakkar

Assistant Professor

GGDSD College

Chandigarh

A Research Paper

Garima Kamboj

Assistant Professor

GGDSD College

Chandigarh


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Franchise Owner(s)Price

(USD)

Mumbai IndiansMukesh Ambani(Reliance Industries) $ 111.9m

Royal Challengers Bangalore Vijay Mallya (UB Group) $ 111.6 m

DeccanChargers Deccan Chronicle(Venkat Ram Reddy) $

107.0 mChennai Super Kings India Cements (N.Srinivasan) $ 91.90 m

Delhi Daredevils GMR Holdings (Grandhi Mallikarjuna Rao) $ 84.0 m

Kings XI Punjab Ness Wadia (Bombay Dyeing), Priety Zinta, Mohit

Burman(Dabur) and Karan Paul (Apeejay

Surendera Group)

$ 76.0 m

Kolkata Knight Riders Red Chillies Entertainment (Shahrukh Khan, Gauri

Khan, Juhi Chawla and J Mehta)

$ 75.1 m

Rajasthan Royals Emerging Media (Lachlan Murdoch, A.R Jha and

Suresh Chellaram), Shilpa Shetty, Raj Kundra

$ 67.0 m

THE IPL EVENTSPONSORS

THE IPL TEAMOWNERS


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Meenaghan, 1991 Sandler and Shani, 1989

Shani and Sandler, 1996 Fama, 19

MacKinlay, 199 Brown and Warner, 1985

Brown and Warner, 1985 Galbraith, 1955

Fama, Fisher, Jensen and Roll, 1969 Patelis, 199

Agarwal and Kamakura, 1995 Thorbecke, 199

Chaney, Devinney, andWiner, 1991 DAmico and Farka, 2 2

Lane and Jacobson,1995 Bomfin, 2 3

Nayyar, 1995 Craine and Martin, 2 3

Mathur and Mathur, 1995 Ramachandran J., 1985

Horsky and Swyngedouw, 198

INTRODUCTIONREVIEWOF



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Hence, we may conclude that firms are entering corporate sponsorships because :

theyare seeking alternative media like event sponsorships to reach target markets

(Meenaghan, 1991).

Second, marketers are finding it more difficult to differentiate seemingly standardized

products and services through traditional media like advertising which is characterized

by considerable clutter (Ha, 1996).

Third, firms are realizing that sponsorship offers a potent avenue for practicing cause

related marketing (Varadarajan and Menon, 1988) and reaching specified target groups

whose interests may be aligned with a firms image and overall marketing strategy

(Javalgi, Traylor, Gross, and Lampman, 1994).

Finally, marketers are being sensitized to the potential of special events to achieve

wider and cost-efficient accessto customer groups.

In such a scenario assessing the worthiness of such sponsorships becomes

increasingly imperative.


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To study the impact of Corporate sponsorship announcements of IPL.

H1 Corporate sponsorship announcements and the team buying of IPL provided

information to investors about expected future positive cash flows, and positivelyimpacted the market value of the announcing firm.

To examine the stock price reactions to the information content of the

sponsorship announcements of IPL with a view of examining the

efficiency of Indian Stock Market.

H02A: No average abnormal returns around Corporate sponsorship announcements

H02B: No average abnormal returns around Team sold announcements.

H03A: No cumulative average abnormal return around sponsorship announcement.H03Aa: No cumulative average abnormal returns for 11 days around event day.

H03Ab: No cumulative average abnormal returns for 21 days around event day.H03Ac: No cumulative average abnormal returns for 41 days around event day.

H03B: No cumulative average abnormal return around team sold announcement.H03Ba: No cumulative average abnormal returns for 11 days around event day.

H03Bb: No cumulative average abnormal returns for 21 days around event day.

H03Bc: No cumulative average abnormal returns for 41 days around event day.


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To compare the cumulative abnormal returns of Corporate sponsors

and team buyers in an attempt to find out who gained more

H04 No difference in the cumulative abnormal returns of team buyers and the sponsors .H04A: No difference in the cumulative abnormal returns for 11 days around event day.

Ho4B: No difference in the cumulative abnormal returns for 21 days around event day.

Ho4C: No difference in the cumulative abnormal returns for 41 days around event day.


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The Sample:

The Event Sponsors

DLF

Kingfis er Airlines Vodafone

Citi Bank

Hero Honda Set Max

IT Pepsi

The Team Buyers

Reliance Group

UB Group

Deccan ronicle

India ements GMR Holdings

Bombay Dyeing Apeejay Surendera

Group

Red ChilliesEntertainment

Emerging Media

Dabur


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The Data:

SECONDARYSOURCES

DATACOLLECTION

DATACOLLECTION

4 SponsoringCompanies

6 Team Buyers

SAMPLE SIZESAMPLE SIZE

2 -2 8

PERIODPERIOD

S & P N X5 0 0

IndexIndex


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The Technique:

The Sponsorship Announcement

The Teams Sold Announcement

150 days

150 days

Clean Period

Clean Period Window Period

Window Period

13 February 2008

20 February 2008


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The daily returns : Rit= ln(Pit / Pit-1)

Where, Pit and Pit-1 are respective daily prices for company i at time t and t-1

The actual returns : Rmt = ln(It/ It-1)

Where, It and It-1 are respectively daily index values at time t and t-1.

The market model : Rit=EI + FI Rmt + Iit

The abnormal return :AR

it =R

it - (Ei + FIR

mt)

Where Rit and Rmt are the period t returns on security i and the market portfolio

respectively, Iit is the zero mean disturbance term Ei and Fi are the parameters of

the market model.

Ei, Fi are the market model parameter coefficients estimated from an OLSregression.


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The average abnormal return for all firms in the sample for day t, (ARt), is calculated as :

with the standard error of the abnormal returns for day t, SEt , given by :

The t-statistic is computed as :

The Cumulative Average Abnormal Return :

it

k

tC !

it

k

tC !


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To study the impact of Corporate sponsorship announcements of IPL.

H1 Corporate sponsorship announcements and the team buying of IPL providedinformation to investors about expected future positive cash flows, and positively

impacted the market value of the announcing firm.

AnnouncementDate

Event

AAR (Average

Abnormal

Returns)

t Statistic

13 Feb 2 1Sponsorship of

IPL announced1.643234 1.6 324

2 feb 2 1

IPL teams

bought by

Corporate

2.554196 4. 9 162

H1 : ACCEPTED


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13 - .5936 - .6 598 1.359148 2.18 196

14 -1.9 243 -1.94189 - .33499 - .53 36

15 .1242 .126 6 1. 66925 1. 11443

16 - .6838 - .69 99 .668444 1. 2245

1 .265 2 .2 5 - .84965 -1.36292

18 1.459 66 1.49 49 -1.23 94 -1.985

19 -3.1188 -3.1835 - .4985 - . 9964

2 - . 3439 - . 3511 -1.6 255 -2.5 63

H02A: REJECTED

H02B: REJECTED


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H03A: No cumulative average abnormal return around sponsorship announcement.

H03Aa: No cumulative average abnormal returns for 11 days around event day.

H03B: No cumulative average abnormal return around team sold announcement.H03Ba: No cumulative average abnormal returns for 11 days around event day.

t df Sig. (2-tailed)

Sponsorship Announcement 1. 6 1 .119

Team Sold Announcement -9.2 1 1 .000

H03Aa: ACCEPTED

H03Ba: REJECTED


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H03Ab: No cumulative average abnormal returns for 21 days around event day.

H03Bb: No cumulative average abnormal returns for 21 days around event day.


Sponsorship Announcement 8.329 2 .

Team Sold Announcement - .8 8 2 .

H03Ab: REJECTED

H03Bb: REJECTED


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H03Ac: No cumulative average abnormal returns for 41 days around event day.

H03Bc: No cumulative average abnormal returns for 41 days around event day.


Sponsorship Announcement-18.832 4 .

Team Sold Announcement

- .114 4 .

H03Ac: REJECTED

H03Bc: REJECTED


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To compare the cumulative abnormal returns of Corporate sponsors and

team buyers in an attempt to find out who gained more.

H04 No difference in the cumulative abnormal returns of team buyers and the sponsors .

H04A: No difference in the cumulative abnormal returns for 11 days around event day.

Announceme

nt N Mean t P (sig.)

Sponsorship 11 .76356.828 .000

Team Sold 11 -3.0119

H04A: REJECTED


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Ho4B: No difference in the cumulative abnormal returns for 21 days around event day.

Announceme


Sponsorship 21 3.350111.313 .000

Team Sold 21 -4.1658

Ho4B: REJECTED

Ho4C: No difference in the cumulative abnormal returns for 41 days around event day.

Announceme


Sponsorship 41 -12.1634-11.89 .000

Team Sold - .

Ho4C: REJECTED


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Sponsorship announcements lead o positive perception of future

cash flows on the part on the shareholder.

Overall for the days studied before and after the announcements

revealed that the returns were negatively significant for most days.

Further, a comparative of the sponsors of IPL and team buyers

revealed that the overall gain of the team buying firms was

greater than tat of the sponsors.


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Future Research

IPL is an important event and a lot of money has been invested

by the corporate in this event. Three IPLs have been announced.

A further research can be carried out to assess the impact of these sponsorships on the gains made by these firms . Further a

longitudinal analysis of this entire event needs to be carried out to

compute the economic worthiness of such events


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