The effect of celebrity endorsement on sustainable firm value: evidence from the Korean telecommunications industry

Celebrity endorsement has been prevalent as an advertising strategy, and many advertisers invest enormous amounts of money into celebrity endorsements. While previous studies have found that the success and failure of celebrity endorsements are related to their attractiveness, expertise, and trustworthiness, it is not known how and which sources of celebrity endorsements can explain firm value, which is a very important factor for firm sustainability. By text mining and sentiment analysis, this research found that increasing the positive source of the celebrity’s attractiveness and expertise has a positive impact on firm value, whereas the loss of the celebrity’s trustworthiness severely deteriorates firm value. Once a celebrity has lost his/her trustworthiness, the negative impact is almost never recovered, given that the negative interaction effect between the positive impact of celebrity expertise and the loss of his/her trustworthiness is over seven times greater than the positive effects from his/her expertise.