Celebrity endorsement and stock market return

Abstract

Purpose: Celebrity endorsement advertising receives increased attention in the relevant literature. Approaching from the abnormal stock market return perspective, the purpose of this paper is to investigate the potential risks and expected profit associated with celebrity endorsement. The factors that are included in this investigation are the attributes relating to celebrities and the endorsed firms.

Design/methodology/approach: Data were collected from over 300 firms that use celebrity endorsements and are listed in two of the biggest stock exchanges in China. The study uses the event study method to analyze the proposed relationships.

Findings: Some of the findings in the current study are consistent with or contrast to those in previous research. Specifically, this study finds that the celebrities’ demographics such as age and gender have little influence on financial return of the endorsed firm. However, investors respond rather negatively toward using actor celebrities to endorse a product or a brand, especially for high-tech products. The match-up endorsement has a positive effect on the firm’s abnormal return.

Research limitations/implications: The current study has implications for the relevant literature and practitioners. Very few studies have used stock market return to measure celebrity endorsement effectiveness. This study provides insights into the influence of various factors associating with celebrities and the endorsed firm, extending the celebrity endorsement research into a broader domain. In particular, this study has practical implications for firms that have used or intend to use actor celebrity endorsement.

Originality/value: This study is the first to use event study method to comprehensively analyze influence of attributes relating to both the celebrities and the endorsed firms in China on stock market return.