Abstract

Endorsements represent significant financial commitments for firms, yet their economic returns are not always clear. This study evaluates whether endorsements create measurable firm value by integrating economic theory with empirical analysis. A microeconomic model is developed to explain how endorsements influence consumer utility, shift demand, and affect pricing decisions. The framework also incorporates the principal-agent problem to demonstrate how incentive-based contracts can increase athlete effort and enhance profitability. To test these theoretical predictions, an event-study methodology is applied to examine abnormal returns surrounding highly visible athletic achievements. Regression analysis is used to assess how market reactions vary across sport type, gender, and firm characteristics. The results reveal limited and statistically insignificant abnormal returns across most specifications, suggesting that market reactions to athletic performance are more muted than theoretical models might predict. These findings show that while endorsements have the potential to create economic value, such effects are not consistently reflected in short-term stock market performance after high visibility events or achievements.

Advisor

Davison, Colin

Department

Business Economics

Disciplines

Advertising and Promotion Management | Business | Economic Theory

Publication Date

2026

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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© Copyright 2026 Michael O'Brien