Abstract
This study investigates how stock markets reacted to the postponement of the Tokyo Olympic Games, which were scheduled to be held in 2020. After the outbreak of the COVID-19 pandemic, the decision to postpone the Games was made on March 24, 2020. However, even before this decision was made, various news outlets had already reported the possibility of cancellation. Although Olympic Games had previously been cancelled five times, they had never been postponed. This event study based on the Fama French factor models provides no evidence that sponsor stock prices reacted differently from their matched firms to news related to the cancellation of the Tokyo Olympic Games. However, they reacted more positively to news of postponement, although the increase in stock returns did not compensate for the drop following the earlier news suggesting the possible cancellation of the Tokyo Olympic Games. Additionally, a cross-sectional regression shows that positive market responses to news of postponement were intensified for Worldwide Olympic Partners and sponsors with a high ratio of individual and foreign shareholders. Because investors did not believe that postponement of the Olympics would have paid off all of the sponsors’ costs, future sponsors will need to place more emphasis on potential deferral risk when making investment decisions.