The decision to raise firm value through a sports-business exchange: How much are Real Madrid’s goals worth to its president’s company’s goals?

Global brands emerging from the world of sports are becoming commonplace, and firms invest in the realm of sports, usually through sponsorship initiatives, to get a link with these global brands. Over and above just a mere business link, what if a company makes a personal commitment to get into the core of a renowned, celebrated sports team? This article provides managers with a procedure to analyze, in a weekly basis, how valuable this type of decision is. A conceptual model shows that the personal involvement of a firm’s figurehead in a first-class sports club can impact positively on firm value if the person is doing well in the task s/he is entrusted with by the club. The empirical application to the soccer club Real Madrid, over 1,409 days and 215 matches, finds that the club’s performance on the field has a significant impact on the economic returns of its president’s company, with asymmetrical effects on firm value in a “loss aversion” pattern, that is, lost matches have a greater effect on firm value than games won.

► A sports club’s performance might have an economic effect on a company linked to the club through a personal commitment.
► Real Madrid’s performance on the field has a significant impact on the market value of its president’s company.
► The result of a match has asymmetrical effects on the firm value in a “loss aversion” pattern.