The value of celebrity endorsements: A stock market perspective

Are celebrity endorsements worthwhile investments in advertising? To answer this question, we analyze a unique sample of 101 announcements made between 1996 and 2008 by firms listed in the USA. Internet is the main medium of communication for these announcements. We employ event study methodology and document statistically insignificant abnormal returns around the announcement dates. This finding is consistent with the notion that the incremental benefits from celebrity endorsements closely match the incremental costs due to such contracts. Further, we investigate if the announcement date return depends on a number of characteristics that are often used in the endorsement literature. As a result, we find that endorsements of technology industry products coincide with significant positive abnormal returns around the announcement dates. Finally, we find weak support for the match-up hypothesis between celebrities and endorsed products.