How an NFL team's record can affect its sponsor's stocks

As a new season kicks off Thursday night, are you thinking it would be nice to see your company's name on the big board of your local NFL team's stadium? You might want to consider the squad's record before shelling out the big bucks required for naming rights. Research shows that a sports team's performance on the field can have a direct effect on the stock returns of sponsoring firms.

A pair of researchers at the University of Connecticut wrote a paper to be published next year in a journal called Critical Finance Review that points to up to a 127 basis point abnormal return for sponsors of winning NFL teams.

"Outcomes of NFL games could serve as a reasonably exogenous instrument for investor sentiment," the authors wrote.

A win during the postseason has a positive effect on the stadium sponsor's stock price, the authors found, to the tune of 82 basis points higher than a loss when averaged out over six models. Monday night games too, generate an abnormal return of 50 basis points higher.

Monday night matchups, of course, are special because there's just the one game on, so they're not competing with the rest of the NFL for TV airtime. Plus it's always shown in prime time and the league tends to schedule bigger games for "Monday Night Football."

That means that while a company spends millions of dollars annually for stadium sponsorship—Procter & Gamble spends an average of $7 million for the naming rights to Gillette Stadium in Foxborough, Massachusetts—they can make that back in market capitalization in just one high-profile game.

"We were surprised by the magnitude of the effect," said Assaf Eisdorfer, professor of finance and co-author of the paper. "Typical games don't show any effect but it definitely happens in Monday night games [when] 30 or 40 million viewers see and hear the sponsor for three or four hours."

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Typical Sunday games don't seem to have much of an effect on the sponsors' stock price, the research found, at least not a statistically significant one. That's likely because those matchups happen simultaneously to others and any predictable result can be lost in the noise.

The researchers looked at home games of NFL teams with stadiums sponsored by publicly traded companies and compared the next-day stock returns after wins and losses. The sample period was the 1996 season through 2013. They concentrated on Monday night games, all playoff games and "upsets" (games in which the outcome was at least 5 points outside of the pregame betting spread).

The returns were then averaged across six models of abnormal return, and compared to a given stock's expected return.

Abnormal returns of under 1 percent might not seem like a big deal, but remember: The companies that typically shell out to sponsor sports stadiums are not your mom-and-pop public companies. They're the big boys like Procter & Gamble and Met Life. That means their stock tends to be larger and less volatile to begin with so the fact that there's a significant shift based on a sport team's performance is even more impressive.

And the size of the market doesn't seem to make a big difference: The Carolina Panthers who play in the fourth-largest market among teams studied showed a similar abnormal return as the Tennessee Titans, the smallest market.

"You have the population of the large markets, but in the small markets you get really loyal fan bases," said Elizabeth Kohl, professor of accounting at the University of Cincinnati (she was at Connecticut when the research was done.) "The magnitude is not driven by the size of the market."

So what's going on here? On the one hand, the sponsoring company could be benefiting from an association with the excitement of a winning team. On the other, the market could be reacting to the prolonged exposure of a winning season.

It makes sense if you think about it: A win in a more important game means the team will continue playing in the season so the sponsor's name will be in front of more fans' and consumers' eyes.

The effect on upset games is twofold, the authors said. First, a winning team has a better chance of making the playoffs and thus extending their season. That means more exposure for the sponsor and its brand. Second, a big upset will be a news story in and of itself, providing coverage in more markets.

As of the end of 2013, publicly traded companies sponsored 62 percent of stadiums in the four major sports and that figure is growing.

The Minnesota Vikings moved in 2013 from the Hubert H. Humphrey Metrodome—named for former vice president—for a new stadium set to open next year. (The team is playing at the University of Minnesota's TCF Bank Stadium (TCB) in the meantime.) U.S. Bank recently signed a deal for exclusive naming rights to the new stadium for reportedly up to $220 million over 20 years. A spokesman for U.S. Bank said the $220 million figure was "on the high side" but declined to provide another number.

The NFL makes a prime example for this kind of research for two reasons. First, it has so few games compared to other sports. Each NFL team has 16 regular-season games, compared to 82 in the NBA and 162 in Major League Baseball. So the importance of each game in football is far greater for a team's record.

Second, it's the most popular sport in the country (46 percent of sports fans say football is their favorite sport) and by far the most watched. During the fall of 2013, 34 out of the 35 most-watched TV shows were football-related, the authors said.

"The Oscars or the Emmys will go back and forth, but to crack the top 10 in Nielsen ratings is ridiculous," Kohl said.