The Impact of FIFA World Cup on Sponsoring Companies and the Host Country Stock Market Index
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The Impact of FIFA World Cup on Sponsoring Companies and the Host Country Stock Market Index MASTER THESIS WITHIN: Business Administration NUMBER OF CREDITS: 15 PROGRAMME OF STUDY: International Financial Analysis AUTHOR: Anas Alsaadi & Sayan Banerjee JÖNKÖPING May 2020 Master Thesis in Business Administration Title: The Impact of FIFA World Cup on Sponsoring Companies and the Host Country Stock Market Index Authors: Anas Alsaadi & Sayan Banerjee Tutor: Michael Olsson Date: 2020-05-18 Abstract We investigate if the FIFA affects the sponsoring companies’ stock returns more than that of the host countries’ securities indices, we have presented the findings of earlier research entities and provided some insight into the influence of FIFA and other sports on global stock index. We have also made a detailed consideration of stock market reaction for the sponsoring companies’ securities and host countries’ security indices and found some articles about country wise investor sentiment based on match outcomes because they are the one to invest in the sponsoring companies or the host country security markets. Throughout our work we have tried to verify our hypothesis and support it with year-wise and host country-wise data through regression models and an event study. In the end, we have tried to come up with coherent findings based on the proven hypothesis and discuss their interpretations along with some possible predictions for the upcoming FIFA world cup in 2022. i Contents 1 Introduction ........................................................................... 1 2 Theory..................................................................................... 2 2.1 Findings of Goldman Sachs ................................................................... 2 2.2 An Insight to Investor Behaviour and Their Consequent Investment Decisions That Affect the Stock Market ................................................. 5 2.3 Reason behind the impact of FIFA On Global Stock Indices and Comparison of Such Impact with That of Other Sports .......................... 6 2.4 Detailed consideration of the stock market reaction at various levels and their variations. ................................................................................ 8 2.5 Based on the previous literature review we have framed the following two hypotheses: ................................................................................... 15 3 Data ....................................................................................... 15 3.1 Countries research and their major indices and currencies ................. 15 3.2 Sponsors .............................................................................................. 16 3.3 Benchmark ........................................................................................... 16 3.4 Data description ................................................................................... 17 3.4.1 South Africa 2010 FIFA ........................................................................... 17 3.4.2 Brazil 2014 FIFA ..................................................................................... 18 3.4.3 Russia 2018 FIFA .................................................................................... 19 4 Method: ................................................................................ 19 4.1 Conducting the Event Study................................................................. 20 4.2 Estimation and Event Window ............................................................. 23 5 Results ................................................................................. 24 5.1 South Africa 2010 FIFA ........................................................................ 24 5.2 Brazil 2014 FIFA .................................................................................. 27 5.3 Russia 2018 FIFA ................................................................................ 28 6 Discussion ........................................................................... 29 6.1 Next event 2022 ................................................................................... 30 6.2 Ethics and sustainability ....................................................................... 31 6.3 Suggestions for future studies .............................................................. 32 References ...................................................................................... 34 Appendix ......................................................................................... 36 ii Figures Figure 1: Estimation and Event Window ............................................................ 24 Tables Table 1: A tabulation of post-1 year and pre-1 year returns for the winners, The runner ups and host countries for the year 1974 to 2010. ................................................... 4 Table 2: Countries research and their major indices and currencies. ........................ 15 Table 3: Sponsors indices and currencies. ........................................................... 16 Table 4: Details of returns South Africa 2010 during FIFA. ................................... 17 Table 5: Correlation Matrix. .............................................................................. 18 Table 6: Details of returns Brazil 2014 during FIFA. ............................................ 18 Table 7: Correlation Matrix. .............................................................................. 18 Table 8: Details of returns Russia 2018 during FIFA............................................. 19 Table 9: Correlation Matrix. .............................................................................. 19 Table 10: South Africa 2010 FIFA NR&AR calculation. ........................................ 25 Table 11: South Africa 2010 FIFA T statistic. ...................................................... 26 Table 12: Brazil 2014 FIFA T statistic. ................................................................ 27 Table 13: Russia 2018 FIFA T statistic. ............................................................... 29 Appendix Figures Figure A1: Excess Returns Jan-May South Africa 2010. ........................................ 36 Figure A2: Excess Returns during FIFA South Africa 2010. .................................. 36 Figure A3: Excess Returns Jan-May Brazil 2014. .................................................. 37 Figure A4: Excess Returns during FIFA Brazil 2014. ............................................ 38 Figure A5: Excess Returns Jan-May Russia 2018. ................................................. 39 Figure A6: Excess Returns during FIFA Russia 2018. ........................................... 39 Tables Table A1: T test South Africa 2010. ................................................................... 37 Table A2: T test Brazil 2014. ............................................................................. 38 Table A3: T test Russia 2018. ............................................................................ 40 iii 1 Introduction The FIFA World Cup, probably the biggest international football event to be ever hosted and watched all over the world. Countries from far end corners of the world come together and lighten up the sportsmanship vibe as they participate as hosts, teams and audience. First hosted in the year 1932 and from then onwards this major sporting event has continued to fascinate millions of avid football fans. As a small example of how great the event is about 3.572 billion people (more than half of the world population) watched the event while it was being telecasted. Such an information casts light on how influential this event is. However, the influence of it has not been confined to the stadium and players only. Letting alone the sportsman spirit of the event, it has even gone to the extent of affecting the primary capital, secondary stock markets and investor predilections. No wonder such an event would cost a fortune to host and invest in. The requisite capital for such a massive investment comes from the public offerings made by private and government sponsoring companies. To what extent would they be able to accumulate enough capital depends on the willingness preferences and speculations made by the investors. An example of this phenomena is evident if one takes a glance at the volumes of security transaction data during those times compared to other years. The onset of this major event also casts light on investors’ tendency to speculate on prospective investment projects. This behaviour can be exemplified when they are the stakeholders of the sponsoring companies and indigenous ones that deal in commodities like sports gear, FIFA merchandise and fast food. The so-called prophecies made by and convictions of these stakeholders about their companies’ performance goad them into gambling on their beliefs in the hope of attaining above-average returns and hefty capital gains during the world-cup hype. We will focus on the following questions • Does the FIFA event help the sponsoring companies' stock returns to improve? • Does the FIFA event help the host countries security market return to improve? • Which one of the sponsoring companies' stock returns or host countries security market return gets improved the most by FIFA world cup which would help us know where to invest our money in. In other words, would it be better to invest our money in the equally weighted portfolio of sponsoring companies or in the host country security market indices. 1 By