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UEFA financial fair play – the curse of regulation [in European J. of Sport Studies]
Abstract
This paper applies simple game theory in order to analyze the UEFA Financial Fair Play (FFP) policy, which was fully implemented in the 2013/14 season. By involving budget constraints put on clubs, FFP may lead to unintended or even adverse effects as indicated by some of the obtained results. In particular, the analysis shows that due to being in the situation of a Prisoner’s Dilemma, the clubs have a strong incentive to bypass the new regulations, what results in additional costs both for clubs to hide and UEFA to detect deviant behavior. As these costs might deter small clubs from trying to cheat, this consequently must have negative consequences on the level of competitive balance within a league. However, a positive outcome of FFP might be that clubs become more independent from benefactors or sugar daddies.
Supplementary resource (1)
... 2). De ce point de vue, améliorer la situation financière des clubs ne dissipe pas entièrement les critiques du FPF relevées dans la littérature sur ce sujet (Morrow, 2014 ;Preuss et al., 2014). On peut également mentionner la critique de Vöpel (2013) sur le fait que le FPF, en limitant le soutien financier des actionnaires, constitue une barrière à l'entrée qui entrave la possibilité de financer par leurs apports, le développement sportif d'un club. ...
... Ce n'est qu'après une décision du Tribunal Arbitral du Sport (TAS) que l'UEFA a dû réintégrer Manchester City à l'été 2020 pour sa participation à l'édition 2020-2021 de la Champions League, faute de preuves recevables. A travers ces exemples, il est ainsi possible de s'interroger si, en poursuivant le but noble de vouloir assainir les finances des clubs européens, les règles du FPF n'incitent pas en parallèle à créer des stratégies innovantes pour contourner cet outil de régulation comme invitent à le penser certains (Preuss et al., 2014). ...
... 2). De ce point de vue, améliorer la situation financière des clubs ne dissipe pas entièrement les critiques du FPF relevées dans la littérature sur ce sujet (Morrow, 2014 ;Preuss et al., 2014). On peut également mentionner la critique de Vöpel (2013) sur le fait que le FPF, en limitant le soutien financier des actionnaires, constitue une barrière à l'entrée qui entrave la possibilité de financer par leurs apports, le développement sportif d'un club. ...
... Ce n'est qu'après une décision du Tribunal Arbitral du Sport (TAS) que l'UEFA a dû réintégrer Manchester City à l'été 2020 pour sa participation à l'édition 2020-2021 de la Champions League, faute de preuves recevables. A travers ces exemples, il est ainsi possible de s'interroger si, en poursuivant le but noble de vouloir assainir les finances des clubs européens, les règles du FPF n'incitent pas en parallèle à créer des stratégies innovantes pour contourner cet outil de régulation comme invitent à le penser certains (Preuss et al., 2014). ...
This article assesses the effectiveness of the UEFA Financial Fair Play (FFP) regulations, one of the few financial regulatory tools for open leagues in Europe in two top divisions in Europe. The objective of FFP borrows from the theoretical concept of ‘soft budget constraint’ in sport finance and regulation literature. Introduced by UEFA in 2011 and fully implemented from 2013, FFP requires clubs qualifying for European competitions to comply with the financial concept of “break-even”, where football expenses should not exceed football revenues. This study uses the French Ligue 1 (L1) and the English Premier League (PL) as a case study for analysing the effectiveness of FFP and includes thirteen clubs (seven French and six English) in total. The selection of clubs was guided firstly by data access but was also restricted to clubs regularly participating in European competitions between 2011, when FFP came into effect, and 2018. The scope of the study enabled us to measure the effect of FFP with regard to the break-even rule and the payroll ratios before and after its full application by comparing the periods 2008-2013 and 2013-2018 using descriptive statistics and tests of comparisons. The results are contrasted according to the national context of the clubs studied and the indicators analysed. First, they show a general improvement in the profitability of the clubs in the sample, although the results are statistically significant only in the case of the PL. Concerning the payroll ratios, the first measure (payroll/operating expenses) decreased significantly for all clubs, with significant differences found comparatively in the case of the L1. The second measure (payroll/operating income) also decreased, but the decrease was only significant at the sample level when the trading activity was included in operating income. From a theoretical perspective, this contribution makes it possible to compare the conclusions obtained with existing works, be it predictive or empirical in nature. From a managerial point of view, it calls for UEFA to remain vigilant in respect of FFP. While the results appear to suggest that FFP has been effective in improving the financial equilibrium of clubs and their payroll ratios, the link between better financial health and good governance remains a key challenge for the industry moving forward.
Cet article ambitionne d’évaluer l’efficacité du système de Fair-play financier (FPF), un des rares outils de régulation des ligues ouvertes en Europe. Elle s’inscrit dans le cadre de la régulation financière des ligues de sports collectifs en empruntant des éléments théoriques au concept de « contrainte budgétaire lâche ». Instauré par l’UEFA en 2011 et pleinement appliqué à partir de 2013, le FPF impose aux clubs qualifiés en coupes d’Europe de respecter une règle d’équilibre financier limitant leurs montants de dépenses issues de l’activité football à ceux de leurs recettes, sans l’aide d’apports extérieurs. Pour parvenir à cet objectif, nous avons retenu sept clubs évoluant en Ligue 1 française (L1) et six en Premier League anglaise (PL). Cette sélection a d’abord été guidée par l’accès aux données et a été restreinte aux clubs participant régulièrement aux compétitions européennes entre 2011, année d’entrée en vigueur du FPF, et 2018. Le périmètre ainsi constitué nous a permis de mesurer l’effet du FPF au regard de la règle d’équilibre et des ratios de masse salariale avant et après sa pleine application en comparant les périodes 2008-2013 et 2013-2018 à partir de statistiques descriptives et de tests de comparaisons. Les résultats sont contrastés en fonction du contexte national des clubs étudiés et des indicateurs analysés. Ils montrent d’abord une amélioration générale de la profitabilité des clubs sur l’ensemble de l’échantillon même si, au niveau national, les résultats ne sont statistiquement significatifs que dans le cas de la PL. Concernant les ratios de masse salariale, le premier étudié (masse salariale/charges d’exploitation) a diminué de façon significative sur l’ensemble des clubs même si la significativité des tests de comparaison n’a été constatée, cette fois-ci, que dans le cas de la L1. Le second (masse salariale/revenus d’exploitation) a également diminué mais la baisse n’est significative à l’échelle de l’échantillon que lorsque l’activité de transfert est intégrée aux revenus d’exploitation. D’un point de vue théorique, cette contribution permet de confronter les conclusions obtenues aux travaux existants qu’ils soient de nature prédictive ou empirique. D’un point de vue managérial, elle invite l’UEFA à rester vigilante car, si les résultats sont plutôt flatteurs laissant à penser que le FPF a été efficace dans l’amélioration de l’équilibre financier des clubs et de leurs ratios de masse salariale, le lien entre meilleure santé financière et bonne gouvernance est toutefois interrogé en fin d’article.
... The most discussed perspective regarding the ESL in the literature is how the league was used by top clubs as a threat to exit. The presidents of certain clubs have publicly declared their desire to join an ESL in the past (Giulianotti and Finn, 1999;Preuss et al., 2014), but forming an alliance is what makes the threat more credible (Westerbeek and Smith, 2003). This threat has given clubs a highly effective control system, steering the behaviour of football governing bodies because the threat works like a veto (Geeraert, 2016;Holt, 2009). ...
For football, 2021 will be marked as the year in which a European Super League (ESL) came closer than ever before to becoming a reality. Nonetheless, one can find many mentions of the ESL in men's football in studies published over the last decades (192 studies collected from Google Scholar), making this an appropriate time to conduct a literature review. Because the year 2021 could represent a turning point for the theoretical conception, the possible formats and features, and the main problems associated with the ESL, it will be interesting to compare past and present research with literature published later. This review highlights the main perspectives of discussion in the literature and points to some gaps, such as the tendency to overlook leagues outside the big five and grassroots. Moreover, the determinants of stadium attendance and TV audience for current competitions are generally transposed to an ESL without considering the potential impact of changing traditional habits and rivalries. Therefore, this study is expected to establish a baseline for future research and policies in the context of European football.
... Concerning the financial results, their model outlines two main outcomes showing a higher clubs' profitability, on one side, gained by a reduction in average payrolls and subsequent wage-to-turnover ratio, on the other side. Other scholars have attempted to establish predictive models aimed in particular at anticipating clubs' financial distress with specific reference to FFP (Alaminos and Fern andez, 2019;Plumley et al., 2021;Preuss et al., 2014). However, a range of articles have recently dealt with the real (and sometimes unintended) consequences of the introduction of FFP regulations through empirical evidence. ...
Purpose
This paper analyses the effectiveness of UEFA's Financial Fair Play (FFP) under the break-even requirement.
Design/methodology/approach
Data was collected from English and French football clubs competing in the English Premier League (EPL) and in Ligue 1 (L1) for the financial years 2008–2018. Our sample includes 395 club-year observations. Relevant statistical tests have been conducted with the aim of analysing the effects of pre (2008–2012) and post (2012–2018) FFP enforcement under both profitability and cost-efficiency assumptions.
Findings
In the EPL, an increase is observed in clubs' profitability through both operating and break-even results. In L1, this improvement is only significant for break-even results of clubs not participating regularly in European competitions (non Euro-oriented clubs). Player expenditures, measured through two wage-to-revenue ratios excluding trading activity for one and including it for the other, have significantly decreased in the EPL except for the Euro-oriented clubs for this latter. Conversely, in L1, this decrease is only significant in both wage-to-revenue ratios for non Euro-oriented clubs and for the whole sample when trading is included.
Practical implications
In addition to evidencing contrasting results in FFP effectiveness across countries, our results suggest it is not the sole cause of such an improvement in clubs' finances. We suggest that UEFA should pursue its efforts to scrutinise the level of clubs' player expenditures and that there is a need for a wider look at the FFP regulations.
Originality/value
This article provides further contribution to empirical studies on FFP effectiveness that have often been focused on a single country.
... It was this practice of rich entrepreneurs who can invest a lot of money that led the Union of European Football Associations (UEFA) to introduce the Financial Fair Play rule (Peeters & Szymanski, 2014). The purpose of this regulation is to bind clubs to spend only what they are able to generate (Preuss, Haugen & Schubert, 2014). Another synergy which occurs between sports and business is merchandising -sales of club shirts, clothing items, and other goods bearing the club's logo. ...
... It was this practice of rich entrepreneurs who can invest a lot of money that led the Union of European Football Associations (UEFA) to introduce the Financial Fair Play rule (Peeters & Szymanski, 2014). The purpose of this regulation is to bind clubs to spend only what they are able to generate (Preuss, Haugen & Schubert, 2014). Another synergy which occurs between sports and business is merchandising -sales of club shirts, clothing items, and other goods bearing the club's logo. ...
... It was this practice of rich entrepreneurs who can invest a lot of money that led the Union of European Football Associations (UEFA) to introduce the Financial Fair Play rule (Peeters & Szymanski, 2014). The purpose of this regulation is to bind clubs to spend only what they are able to generate (Preuss, Haugen, & Schubert, 2014). Another synergy which occurs between sports and business is merchandisingsales of club shirts, clothing items, and other goods bearing the club's logo. ...
... It was this practice of rich entrepreneurs who can invest a lot of money that led the Union of European Football Associations (UEFA) to introduce the Financial Fair Play rule (Peeters & Szymanski, 2014). The purpose of this regulation is to bind clubs to spend only what they are able to generate (Preuss, Haugen & Schubert, 2014). Another synergy which occurs between sports and business is merchandising -sales of club shirts, clothing items, and other goods bearing the club's logo. ...
Die Organisation von Sportligen ist durch zahlreiche Besonderheiten wie z. B. die Bewirtschaftung von Teameffekten oder das Trittbrettfahrerproblem geprägt. Diese Besonderheiten machen es notwendig, dass Teams innerhalb einer Liga in einem gewissen Maße kooperieren. Wie diese Kooperation ausgestaltet ist und wie weitreichend diese kooperativen Maßnahmen gehen, wird im US-Sport anders beantwortet als in der Organisation von europäischen Sportligen. Die Organisation von Sportligen hat dann weitreichende Konsequenzen z. B. für die Ausgestaltung des Spielermarktes, Transferregeln, Ablösesummen und Spielergehälter.
Fairness in sport is a widely shared meritocratic norm. Its application is usually restricted to equality of opportunity to compete for victory. Paralympic sports lay down a further challenge in that equality of opportunity must be shaped by considerations of fairness, evidenced by the development of discrete competition categories to construct fair and meaningful contests. In this article we extend these philosophical ideas to consider how Fair Equality of Opportunity might operate in the context of Paralympic sports classification. We articulate three conceptions of fairness relevant to these sports: (i) background fairness; (ii) procedural fairness; and (iii) stakes fairness. We critically review the International Paralympic Committee’s Policy on Sport Equipment in relation to the first two conceptions and argue that greater clarification, theorization and rule modification is required if physical prowess, as opposed to equipment technology, is to be assured as the dominant determinant of Paralympic athletic success.
Bullet points:
• Fair equality of opportunity in sport is applied to disability or Paralympic sport
• Conceptual and ethical review of IPC sport equipment policy
• Greater theorization and rule modification required to preserve the principle that physical prowess as opposed to equipment technology is the dominant determinat of athletic success
The aim of this article is to set out the rationale for the new UEFA Financial Fair Play Rules (FFPRs), examine what the provisions state and offer a conclusion about their significance. The article will illustrate that there are a number of criteria and exceptions which clubs can use to their advantage. There will also be an explanation regarding the amortisation of transfer fees and how such accounting practices will affect clubs wishing to break-even in order to qualify for UEFA club competitions.
This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears the costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.
'An excellent volume for courses on economics or related quantitative fields, this volume is one of a kind, and for that reason libraries should consider purchasing it. No other title currently on the market comes close to doing what Késenne's does... first-rate. Highly recommended.'
Sports now constitute one of the most valuable forms of broadcast entertainment in today's lucrative international market. This textbook explains the economics underlying the sports broadcasting phenomenon. The specific regulatory culture governing sports broadcasting means that the financial economy of this area has many unique features. The Economics of Sports Broadcasting provides an accessible, detailed introduction to all aspects of economics in this fascinating area. The book contains a wealth of textbook features and has been written and designed to facilitate student learning. It includes: questions of ownership, trade and commodity in sport the historical context for contemporary sports broadcasting the key players - viewers, TV channels, sponsors, clubs, event owners and authorities the regulations governing televised sport the international context for broadcast sport competition and game theory in sports broadcasting sports broadcasting's changing landscape of ownership and supply channels. This book will be useful for courses in media and broadcasting, economics, sport management and sports development. © 2007 Chris Gratton and Harry Arne Solberg. All rights reserved.
Obwohl die Bundesliga in dem potentiell attraktivsten europäischen Fußballmarkt operiert, ziehen ihre Klubs in der Champions League vor allem gegen die Konkurrenten aus der Premier League systematisch den Kürzeren. Weil Überinvestition gerade nicht durch eine Auflösung der betroffenen Klubs bestraft wird, trägt der Turnierwettbewerb im europäischen Fußball den Charakter eines „Zombierennens“. Klubverfassungen beeinflussen dabei ganz entscheidend die Möglichkeiten der Turnierteilnehmer, neue Finanzierungsquellen für den Rüstungswettlauf zu erschließen. An einem prominenten Beispiel, den „Geldspritzen“ so genannter „Patenonkel“ wird der gegenwärtige Wettbewerbsnachteil der über Vereinsverfassungen kontrollierten Bundesliga-Mannschaften detailliert herausgearbeitet.
A growing literature on leagues composed of owners maximizing winning percentage shows that particular league rules have different impacts compared with leagues composed of profit-maximizing owners. But the underlying question of how to distinguish between the two types of leagues has received no treatment. In this article, we show that the two types of leagues can be distinguished in the talent market. A league of winning-percentage-maximizing owners will have higher talent costs and greater demand for talent. But, and perhaps more important, the level of competitive balance between the two types of leagues is indeterminate. In addition, a new policy instrument is suggested, namely, nudging owners toward one or the other objective, depending upon the particular locations of the demand for talent if owners pursue profits or winning percentage.
With European soccer leagues in mind, a novel model of club owner objectives nests standard profit (and win) maximization, but adds benefactor behavior where owners inject personal funds to increase their team's quality. A generosity parameter differentiates owners; parameter value zero equates to profit maximizers, with benefactors emerging at sufficiently positive values. The model is used to investigate consequences of Union of European Football Associations' (UEFA) Financial Fair Play regulations (FFP) for the league, aimed to preclude benefactor injections. Assuming (post-Bosman) a relatively large elasticity of talent supply to the league, FFP is a poor regulatory device, creating welfare losses for fans, owners, and players.
Professional football in Europe is characterized by persistent deficits and growing debts among the majority of the top league clubs. Despite these problems, the clubs have an abnormally high survival rate. This paper focuses on this apparent paradox and poses the question: Why do only very few European professional football clubs go out of business even though they operate chronically on the edge of financial collapse? The paper argues that the paradox can be explained by the fact that professional football clubs operate within soft budget constraints in a way which is similar to the role of large companies in socialist economies – a phenomenon which was first identified by the Hungarian Economist János Kornai.