Sponsorship in the European automotive market: an Event Study analysis

3 INTRODUCTION In the 60‟s the continuous growing amount of empirical evidence about the volatility of stock prices, which occurs around a specific event period, permitted to conceive a new way of assessing the economic outcome of diverse strategies on the financial markets. The above mention procedure is called “event study” and could be considered as one of the most famous economic method in the existent economic literature. The model assumes that “information, that is made public in the market, is liable to affect the value of one or more firms at the same time”. (Delattre 2007) The main advantage of an event study consists in the ability to isolate the effect of a particular event from those occurred in the market. An event could be a dividend announcement, a marketing strategy, a new product preannouncement and so forth. For this reason it has been used for several purposes both in the marketing and in the financial field. According to Campbell (1997), a clear evidence of the effectiveness of such a method is the implicit acceptance of event-study methodology in the U.S Supreme Court for determining materiality in the insider trading case and for determining appropriate disgorgement amounts of fraud. Nevertheless the development of such a method has been more oriented towards firms which work in the US market, hindering the extension and the knowledge outside the American boundaries. Consequently there is obviously a lack of studies conducted which take into account firms inside the European marketplace. Besides event study has been often based on a sample of specific companies in order to value the impact of the event in a well-defined group, but rarely using that information to make a comparison between companies operating in the same industrial sector. The purpose of the paper is to test and compare the eventual benefits about sponsorship contracts signed by two of the most important European automobile companies: Citroen and Fiat. Citroen is a French car automotive that was created in 1919 in Paris by André Citroen. After a strong growth during the 50‟s and the 60‟s, the French company was forced to merger with Peugeot, creating thus the group PSA.