Baseball player sliding into a stock market chart, representing the impact of sports scandals on investments.

Can Ethical Scandals Strike Out Your Portfolio? How Sports Sponsorships Impact Investors

Lena Voss in Business & Economy August 2025 • 4 min read.

"A Deep Dive into the Risks and Rewards of Aligning with Professional Sports Teams"

The roar of the crowd, the thrill of victory – professional sports hold a unique place in our culture and economy. For businesses, sponsoring a sports team offers a tempting chance to boost brand visibility, connect with passionate fans, and ultimately, drive sales. But what happens when the teams or leagues they support are hit by scandal? Can a team's ethical missteps impact a sponsor's bottom line?

A recent study in the Asian Economic and Financial Review investigated exactly that, focusing on the Chinese Professional Baseball League (CPBL) in Taiwan. The research delved into how negative incidents, like gambling and match-fixing, affected the stock performance of companies that sponsored CPBL teams. The findings offer valuable lessons for investors and businesses considering sports sponsorships.

The study isn't just an academic exercise. It highlights the increasing importance of ethical considerations in the world of sports and business. In an era where consumers are increasingly aware of corporate responsibility, companies must carefully evaluate the risks and rewards of aligning with sports organizations.

Do Scandals Really Hurt Sponsors?

Baseball player sliding into a stock market chart, representing the impact of sports scandals on investments.

The study used a panel data analysis of five major negative incidents in the CPBL over a 20-year period. Researchers looked at the “abnormal returns” of sponsor companies – essentially, how their stock performed compared to what was expected, especially around the time of the scandals. They also considered factors like the size of the sponsoring company, the industry it belonged to, and its commitment to corporate social responsibility (CSR).

Surprisingly, the results weren't always what you might expect. While some scandals did negatively impact sponsor's stock returns, the effect wasn't consistent. This suggests that a simple association with a troubled team doesn't automatically spell disaster for a sponsor's stock.

Company Size Matters: Larger companies seemed to weather the storm better than smaller ones. This aligns with the idea that bigger, more established businesses have more stable operations and diversified investments, making them less vulnerable to the impact of a single event.
Industry Impact Varies: The study found that certain industries were more sensitive to sports scandals than others. For instance, food and financial companies sometimes experienced a negative impact on their stock performance, while other industries were less affected.
CSR Can Offer Some Protection: Companies with a strong commitment to CSR – those that had won CSR awards, for example – sometimes saw a smaller negative impact from CPBL scandals. This suggests that a positive brand reputation and a track record of ethical behavior can act as a buffer during times of crisis.

However, the protective effect of CSR wasn't always guaranteed. In some cases, companies with CSR awards still saw their stock prices decline after a scandal, indicating that even a strong reputation can't completely insulate a company from negative publicity.

The Bottom Line: Sponsorships – Proceed with Caution

So, what’s the takeaway for investors and businesses? Sports sponsorships can be a powerful marketing tool, but they also come with risks. Before aligning with a team or league, companies should carefully assess the organization's ethical track record and reputation. Investors, likewise, should be aware that even seemingly solid sponsorships can be vulnerable to the unpredictable nature of scandal.

About this Article -

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Everything You Need To Know

How can ethical scandals in sports impact the stock performance of companies that sponsor teams?

Ethical scandals, such as gambling or match-fixing, can negatively impact a sponsor's stock performance, though the effect isn't consistent. The impact depends on factors like company size, industry, and the sponsor's commitment to Corporate Social Responsibility (CSR). A negative incident involving a team in the Chinese Professional Baseball League (CPBL) could lead to a decrease in a sponsor's stock value, particularly for smaller companies or those in sensitive industries like food and finance. Strong CSR practices can offer some protection but don't guarantee immunity from negative publicity.

Does the size of a sponsoring company influence its vulnerability to negative publicity from sports scandals?

Yes, larger companies tend to weather sports-related ethical scandals better than smaller ones. This is likely because larger, more established businesses have more stable operations and diversified investments. This stability allows them to be less vulnerable to the impact of a single negative event within an organization like the Chinese Professional Baseball League (CPBL). Smaller companies, on the other hand, may see a more significant impact on their stock performance because they have fewer resources to absorb the negative publicity.

In what ways can a company's commitment to Corporate Social Responsibility (CSR) protect it from the negative effects of sports scandals?

A strong commitment to Corporate Social Responsibility (CSR) can act as a buffer when a sponsored team or league faces an ethical scandal. Companies with a positive brand reputation, often demonstrated through CSR awards, may experience a smaller negative impact on their stock prices compared to companies without such a commitment. This suggests that a track record of ethical behavior can help mitigate the damage caused by association with a scandal in organizations like the Chinese Professional Baseball League (CPBL). However, it's important to note that even strong CSR cannot completely insulate a company from negative publicity.

Which industries are most sensitive to negative publicity arising from ethical violations in sports sponsorships, and why?

Certain industries are more vulnerable to negative publicity from sports scandals than others. The study of the Chinese Professional Baseball League (CPBL) suggests that food and financial companies may experience a more significant negative impact on their stock performance compared to other industries. This heightened sensitivity could be because consumers and investors in these sectors place a greater emphasis on trust and ethical conduct. Scandals can erode this trust, leading to a decline in stock value. Other industries might be less directly associated with ethical considerations in the consumer's mind, therefore experiencing a milder impact.

Beyond Corporate Social Responsibility and company size, what other factors should investors consider when evaluating the risks associated with sports sponsorships?

Besides Corporate Social Responsibility (CSR) and company size, investors should consider factors such as the specific nature of the scandal, the severity of the ethical violation, and the team's or league's response to the incident. Also, scrutinize the specific terms of the sponsorship agreement, looking for clauses that address ethical conduct or allow for termination in the event of a scandal. The industry the sponsored team operates in can be crucial. Also, one must understand general market trends. The study focusing on the Chinese Professional Baseball League (CPBL) gives a foundation for understanding risks, but more research would be needed on other sports to extrapolate that understanding.