IJSF 16:2

Abstract:International Journal of Sport Finance, Volume 16, No.2, May 2021.

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The Flutie Effect: The Influence of College Football Upsets and National Championships on the Quantity and Quality of Students at a University
Authors: Austin F. Eggers, Peter A. Groothuis, and Parker T. Redding
Abstract:Using a panel study of universities, we find that football success, as measured either by an upset win or winning a national championship, increases applications and enrollment at a university. Surprisingly, we further find that losing an upset game also increases student enrollment numbers. When examining the academic quality of incoming students following one of these events, we encounter mixed results. Our findings indicate that winning a national champion-ship lowers the number of students enrolling at a school from the top 10%, and between the top 10% to top 25%, of their high school class. However, we also find that winning either a national championship or an upset victory in-creases the average high school grade point average of students who choose to enroll at the school. Overall, our results suggest that athletics serve as a consumption amenity, leading students to apply and enroll at the university.

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Loss Aversion, Reference-Dependent Preferences, and Collective Bargaining Agreements in the National Basketball Association
Authors: Candon Johnson
Abstract:The importance of competitive balance in sports leagues provides a negotiation tactic to leagues and owners when negotiating collective bargaining agreements. This paper provides evidence of loss aversion in National Basketball Association (NBA) game attendance across different collective bargaining agreements. Over time, NBA owners have negotiated policies such as salary caps, maximum salaries, and rookie scale salaries among other devices to increase competitive balance. Competitive balance is often a goal of sports leagues in order to increase demand for attendance, but should competitive balance be a bargaining tool used by commissioners and owners? Findings show the prevalence of loss aversion and reference-dependent preferences influencing attendance in the NBA across different collective bargaining agreements, illustrating that fans do not demand competitive balance. Instead, attendance is driven by expected home team wins and losses. Expected home team losses driving attendance demand reflects the desire of fans to witness upsets by home teams.

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What Explains Labor’s Declining Share of Revenue in Major League Baseball?
Authors: John Charles Bradbury
Abstract:This study explores reasons for the declining share of revenue going to Major League Baseball players. Though the players’ union and team owners have proposed competing explanations, the phenomenon has not received any rigorous academic study. Economic theories for the similar decline of labor share in the macroeconomy provide possible explanations. The ability to estimate baseball players’ marginal revenue products through their performance offers a unique opportunity to examine the role of worker productivity in determining labor’s share of income in general. The analysis indicates that the returns to player performance have declined and that collective bargaining agreement terms that promote revenue sharing among teams appear to play a significant role. In addition, increased returns from new non-player revenue sources have lowered the share of league revenue going to players. Competition from substitute labor inputs and changes in returns to physical capital do not appear to be important factors.

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The Value of Olympic Sponsorship: Domestic vs Foreign Sponsoring Firms
Authors: Prith Dean V. Baim, Levon Goukasian, Marilyn B. Misch
Abstract:This paper examines the impact of Olympic Sponsorship announcements on stock returns for sponsors of the ten Olympic Summer Games held between 1984 and 2020. The paper finds that sponsorship announcements are associated with an average 0.44% impact on returns on the announcement day. This increase translates to a $61 million increase in sponsoring firms’ market value, on average. The study also documents significant differences in the impact of Olympic sponsorship announcements on domestic versus foreign sponsors’ stock returns as well as significant differences on the returns of Olympic partners versus Olympic supporters. Abnormal returns for firms domiciled in the host country are shown to be significantly higher than abnormal returns for firms domiciled outside the host country. Abnormal returns are significantly higher for Olympic partners, who pay a higher sponsorship fee, than for Olympic supporters. Overall, our findings imply Olympic sponsorship is a value-creating strategy, especially for domestic firms.

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