The Impact of Celebrity Endorsement Announcements : An Empirical Study of the Stock Market Reaction to Celebrity Endorsement Deal Announcements in the USA and Europe

Abstract

Do celebrity endorsements impact the stock price? In this thesis, we aim to answer this by analyzing a unique sample of 155 announcements from 2009 to 2023 by firms listed in Europe and the USA, using announcements from social media, press releases, and news sources. Employing the event study methodology, we observe no significant abnormal returns on the announcement day. However, in the USA, significant negative returns occur two days before announcements, indicating potential information leaks, followed by positive returns postannouncement. In Europe, we document no significant abnormal returns, indicating that the benefits of celebrity endorsements are closely equivalent to their costs. In addition, we examine if the abnormal returns depend on several characteristics. Our findings suggest lower returns for male celebrities compared to women. Additionally, the celebrity-firm match-up negatively influences abnormal returns in the USA. In Europe, celebrity popularity negatively affects the stock price, and technology firms experience a significantly positive impact from endorsements.