Baseball diamond with stock charts symbolizing financial risk in sports sponsorships.

Beyond the Game: Do Corporate Ethics Actually Impact Stock Performance?

Samir D’Costa in Business & Economy August 2025 • 4 min read.

"Uncover the surprising link between ethical scandals in sports and the financial repercussions for sponsors, challenging common assumptions about corporate social responsibility and market resilience."

In the high-stakes arena of professional sports, the spotlight shines not only on athletes and teams but also on the corporations that fuel the game through sponsorships. But what happens when ethical scandals erupt, casting a shadow over the sports world? Do these negative incidents impact the financial health of the companies that so visibly associate themselves with these teams?

A recent study delves into this intriguing question, focusing on the Chinese Professional Baseball League (CPBL) in Taiwan. By analyzing the stock market performance of companies sponsoring CPBL teams during times of scandal, the research uncovers some surprising truths about the relationship between corporate ethics, sports sponsorships, and financial returns.

This article explores the study's findings, revealing whether ethical violations in sports truly translate into financial losses for sponsors, and whether a commitment to corporate social responsibility (CSR) can help companies weather the storm.

The Unexpected Twists: How Sports Scandals Impact Sponsor Stock

Baseball diamond with stock charts symbolizing financial risk in sports sponsorships.

The study examined five major gambling and match-fixing incidents that shook the CPBL between 1990 and 2009. Researchers collected financial data from the CTMONEY database and the CPBL's official website, focusing on the stock performance of the sponsoring companies during and after these scandals. Using panel data analysis, they aimed to determine whether there was a significant negative impact on the sponsors' stock returns.

Contrary to expectations, the results revealed a more nuanced picture. While one might assume that a scandal would automatically lead to a drop in a sponsor's stock value, the study found that this wasn't always the case. In fact, there were instances where the negative impact was not statistically significant.

Mixed Results: The impact of scandals on stock returns varied, with some incidents showing no significant negative effect.
CSR as a Shield: The study investigated whether companies with strong CSR initiatives were better protected from financial fallout.
Size Matters: Company size influenced the impact, with larger companies sometimes experiencing a smaller negative effect.
Industry Influence: The type of industry a sponsor belonged to also played a role in how their stock performed during a scandal.

These findings challenge the assumption that sports scandals automatically spell financial disaster for sponsors. The market's reaction appears to be more complex, influenced by factors such as the company's size, industry, and commitment to social responsibility.

Lessons from the Diamond: Navigating the Risks of Sports Sponsorships

This study offers valuable insights for companies involved in sports sponsorships. It highlights the importance of not only assessing the potential benefits of associating with a sports team but also understanding the risks involved. A commitment to ethical behavior, coupled with a robust CSR strategy, may provide a buffer against the negative financial consequences of scandals. For investors, these findings underscore the need to consider a company's ethical profile and risk management strategies when evaluating its stock. Sports sponsorships can be a powerful marketing tool, but they also come with the potential for reputational and financial damage. By understanding the complex interplay between ethics, responsibility, and market perception, companies can make more informed decisions and protect their bottom line.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.18488/journal.aefr/2016.6.3/102.3.162.171, Alternate LINK

Title: Do Negative Incidents And Corporate Social Responsibility Influence On Sponsors Stock Abnormal Returns?

Subject: General Economics, Econometrics and Finance

Journal: Asian Economic and Financial Review

Authors: Huei-Wen Lin

Published: 2016-01-01

Everything You Need To Know

What was the primary focus of the study on the impact of scandals on corporate sponsors?

The study primarily focused on the Chinese Professional Baseball League (CPBL) in Taiwan. It examined the stock market performance of companies that sponsored CPBL teams during times of scandal, particularly between 1990 and 2009. The research aimed to understand if ethical violations in sports, like gambling and match-fixing incidents, led to financial losses for the sponsors and whether their commitment to corporate social responsibility (CSR) played a role in mitigating those losses.

How did the study's findings challenge the initial assumptions about sports scandals and their impact on sponsors?

The study's findings presented a nuanced picture, challenging the common belief that sports scandals automatically lead to financial disaster for sponsors. While one might expect a direct negative correlation between a scandal and a drop in a sponsor's stock value, the study revealed that this wasn't always the case. The impact on the stock returns varied, with some incidents showing no significant negative effect. This suggests that the market's reaction is more complex, influenced by factors beyond just the scandal itself.

What role did Corporate Social Responsibility (CSR) play in the study's findings regarding sponsor performance during scandals?

The study investigated whether companies with strong CSR initiatives were better protected from the financial fallout of scandals. It explored the idea that a commitment to ethical behavior and a robust CSR strategy could act as a buffer against the negative financial consequences. While the specific degree of protection isn't detailed in the provided context, the research suggests that CSR may help mitigate some of the negative impacts.

Besides CSR, what other factors influenced the impact of scandals on the stock performance of sponsors, according to the study?

The study found that company size and industry influence played roles in determining the impact of a scandal. Larger companies sometimes experienced a smaller negative effect, potentially because their size and diversified operations provided a degree of insulation. Additionally, the type of industry a sponsor belonged to affected its stock performance during a scandal, implying that certain industries might be more or less vulnerable to the negative consequences of association with a scandal-ridden team or athlete.

What are the key takeaways for companies and investors regarding sports sponsorships, ethics, and financial performance based on the study's insights?

For companies, the study highlights the importance of assessing not only the benefits of sports sponsorships but also the associated risks. A commitment to ethical behavior and a robust CSR strategy are crucial for potentially buffering against financial repercussions from scandals. For investors, the findings underscore the need to consider a company's ethical profile and risk management strategies when evaluating its stock. Understanding the interplay between ethics, responsibility, and market perception enables more informed decisions and helps protect the bottom line. Ultimately, sports sponsorships are a powerful marketing tool with potential for reputational and financial damage.