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Profits may lead teams to lose matches, but scoring goals does not lead to profit
Abstract
The purpose of this paper is to examine the relationship between profitability and sporting performance in European football. Profitability has been rarely studied because it has not been considered an aim of European clubs, in contrast with American clubs. However, the emergence of investors who invest on both sides of the Atlantic shows that the objectives of owners can be diverse and that profitability has to be taken into account. The study of the compatibility or incompatibility of sporting performance and profitability has implications for the existence of clubs with owners with different objectives in the same competition, or even owners with different aims in the same club. The paper finds that financial performance has a negative influence on clubs’ sporting performance, while sporting performance does not have a negative influence on profitability. Moreover, ownership concentration has a negative influence on both performance variables. These findings show that the pursuit of sport success could undermine the profitability and sustainability of clubs and that investors could focus less on sport results and focus more on maximizing the financial returns on their investments.
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... Other authors have integrated literature reviews in their academic publications, but such reviews have been either unsystematic (e.g. Amirnejad et al., 2018;S anchez et al., 2020;Ward and Hines, 2017) or have been conducted before a noticeable increase in publications in recent years (e.g. Baur and McKeating, 2011;Jones, 2014). ...
... A mapping of all 129 articles to a subject area and the total number of matches can be obtained from the supplementary files (Appendix). Two things are important to note: (1) many articles cover more than one subject area (e.g. Kelly et al., 2012;S anchez et al., 2020) and (2) the sub-chapters containing the result discussions do not reference every article, but focus on providing a comprehensive overview of key findings per subject area. ...
... Baur and McKeating (2011) add that a sporting performance improvement is evident for teams in lower divisions, but neither in the first divisions nor in international competition. Irrespective of the investor type, literature consistently argues that a high degree of ownership concentration (the amount of shares a single owner holds) has a negative effect on financial discipline (Acero et al., 2017;Bevec, 2018;Dimitropoulos, 2014;Jambor, 2018;S anchez et al., 2020). Acero et al. (2017) illustrate that it can lead to a decrease in financial performance. ...
Purpose
Since the beginning of the 2000s, investors have more frequently invested into professional football clubs, thereby radically changing the industry landscape. This review's purpose is to analyze and synthesize the state of research to understand motives, roles and implications of football club investors, and to provide recommendations for further research.
Design/methodology/approach
The paper presents an integrative literature review by identifying relevant English articles based on the search terms investor, owner, investment, ownership, shareholder and stakeholder in combination with soccer or football. Around 2,431 articles were reviewed. A total of 129 relevant articles was analyzed and synthesized within eight subject areas.
Findings
Investors in professional club football is a young research stream with a clear European focus. Investor motives and roles are diverse and implications are multidimensional. Investors mostly aim for indirect returns rather than pure profit- or win-maximization.
Research limitations/implications
Football clubs comprise an own investment class for which the identified, unique specifics must be considered to develop a financially successful investment model. Thorough academic research of investors' inherent characteristics, investor-club pairings and the pillars of long-term strategies for successful investor-club liaisons are avenues of future research. Furthermore, the results illustrate the need for research outside of Europe.
Originality/value
The paper is the first systematic, integrative review of existing literature in the domain of equity investments into professional club football. The findings genuinely show that, depending on the investor type and ownership structure, investors have a wide impact in professional club football.
... Sanchez et al. (2016) and Acero et al. (2017) identified a negative relationship between ownership concentration and profitability in European football clubs. Sanchez et al. (2020a) revealed that financial performance negatively influences on clubs' sporting performance, whereas sporting performance does not have a negative impact on profitability. Ownership concentration was found to have a negative influence on both performance variables. ...
Purpose: The landscape of football ownership has undergone significant transformations throughout history, particularly in recent years. This study endeavours to analyse this evolutionary process aiming to understand the shifts in the management of football clubs.
Design: This paper analyses and synthesises the evolution of football club ownership in the ’Big Five’ European leagues from their inception, employing a blend of theoretical frameworks and empirical evidence. Additionally, the authors have constructed a distinctive database encompassing the listings of football clubs and the emergence of foreign owners.
Findings: The evolution of ownership in European football can be delineated into six distinct stages, spanning from its origins as a community-based activity to its contemporary status as an entertainment industry under the control by international investors. Notably, this evolution varies significantly across different leagues, contributing to the observed disparities among countries today. Many alterations in football club ownership can be attributed to amendments in laws and regulations. However, these adjustments have frequently resulted in unintended consequences.
Implications: Numerous shifts in football club ownership stem from variations in laws and regulations. Nevertheless, these adjustments often lead to unintended consequences. The findings presented in this article offer key insights for future studies on football regulations and research into the ownership dynamics of football clubs
... delBarrio and Szymanski (2009) regarding excessive expenditures by major clubs in their pursuit of competitive success, often at the expense of profitability(Sánchez et al., 2020). This suggests that achieving top scores in championships does not necessarily equate to efficient team management, as highlighted byMiragaia et al. (2019).However, our research encounters two primary limitations. ...
Objetivo do estudo: O objetivo deste artigo é analisar e comparar a situação de crise financeira no futebol, com foco tanto na primeira quanto na segunda divisãoMetodologia/abordagem: Inicialmente, calculamos as pontuações comparativas de modelos como Altman (1968, 1983, 2000, 2016), Conan e Holder (1979), Springate (1978), Taffler (1982) e Zmijewski (1984). Posteriormente, aplicamos a análise fatorial para investigar as diferenças entre as equipes. Finalmente, reestimamos os modelos para os dados e contrastamos os resultados.Originalidade/Relevância: As descobertas revelam que a rentabilidade e o endividamento são as principais variáveis explicativas, destacando a falta de adaptação das equipes aos choques. Além disso, as equipes de segunda divisão mostraram melhor solvência e rentabilidade do que os clubes de primeira divisão no ano seguinte ao surto da pandemia.Principais resultados: Os resultados revelam que a lucratividade e a endividamento são as principais variáveis explicativas, destacando a falta de adaptação das equipes a choques. Além disso, os times da segunda divisão apresentaram melhor solvência e lucratividade do que os clubes da primeira divisão no ano seguinte ao surto da pandemia.Contribuições teóricas/metodológicas: A nível teórico, esta pesquisa avalia a adequação desses modelos para este setor e sublinha a necessidade de restringir despesas durante um período excepcional.
... No Brasil, o amadorismo e a implementação relativamente pequenos de práticas de governança também podem explicar o fraco desempenho financeiro (Gomes et al., 2022;Nakamura & Cerqueira, 2021 A medição do desempenho financeiro em clubes de futebol não possui uma proxy consolidada. Alguns estudos consideram uma medida relacionada à sua rentabilidade, por exemplo, Retorno sobre Ativos (ROA) ou Margem de Lucro (Dimitropoulos & Limperopoulos, 2014;Sánchez et al., 2020). Por outro lado, alguns autores consideram que os clubes visam maximizar suas receitas para ter mais recursos para investir em talento de jogadores. ...
Objective: This study analyzes the influence of the representativeness of players’ contracts on financial and sports performance in Brazilian football clubs. Method: Based on the 2020 Brazilian Football Confederation rank, our sample comprises 29 teams covering the 2011-2021 period. We use the players' contracts registered in the intangible assets as our primary independent variable. We also subdivided this value into professional and young players. Results and Discussion: Results suggest that most big clubs invest more in professional players while small clubs in young players. Moreover, a higher investment proportion in players' contracts influences financial and sportive performance. This is mostly confirmed by the investment in professional players, whereas the investment in developing young players could not be confirmed. Contributions: Intangible assets play an important role in the overall success of football clubs, not only from a financial perspective but also in terms of their sporting achievements. This comprehensive study seeks to provide evidence that sheds light on the distinctive relationship between players' contracts and the subsequent impact on both the sporting and financial performance of Brazilian football clubs. Furthermore, it is worth noting that in Brazil, clubs have the unique advantage of being able to capitalize on costs associated with the development of young players, which is a distinctive setting to analyze.
... Y, por último, los clubes priorizarán la obtención de sus éxitos deportivos. No obstante, hay estudios que defienden que en determinados clubes hay otros objetivos prioritarios diferentes a los éxitos deportivos, como el de Sánchez et al. (2020) donde hay propietarios de clubes cuyo objetivo es la rentabilidad financiera por delante del éxito deportivo incluso en el marco del fútbol profesional europeo. ...
Este documento analiza las competiciones deportivas en el fútbol español y europeo. La industriadel fútbol requiere aplicar metodología empírica con el objetivo de optimizar decisiones.Por un lado, en el área deportiva, enfocada a los clubes profesionales. Por otro, a los organizadoresde las competiciones. A partir de un modelo de programación lineal, se realiza un análisisdel nivel de eficiencia de las competiciones de fútbol y sus comportamientos de mercado. Observaremoscómo las competiciones de enfrentamiento directo, como la Copa del Rey de España yUEFA Champions League (UCL) son las más eficientes en relación a los torneos de larga duracióncorrespondientes a las 4 grandes ligas europeas. Los datos revelan que según el formato decompetición los jugadores más valiosos no garantizan siempre el éxito deportivo, y que la incertidumbreen el resultado es la variable clave en la eficiencia y competición de las competiciones.
... Insolvency is always part of the potential trajectories of clubs, even under the most rational and disciplined management. The situation is not fundamentally different in other European countries, as Sánchez et al. (2020) conclude that better financial performance negatively affects on-the-field performance. ...
We aim to explore whether ongoing digital innovations in Premier League clubs may substantiate a prospective change in their business model and potentially lead to a solution to the financial sustainability issue in professional football. Our exploratory study is to identify ongoing digital innovations and what changes can be foreseen in future years. The empirical analysis is based on information collected from club webpages, their selected social media pages, and top sports business journals. Our results indicate that despite the numerous digital innovations already implemented in the clubs, their utilisation has not reached a level to justify a more complex business model innovation. However, several changes indicate that such a fundamental transformation will likely happen in the foreseeable future. Our work's scholarly contribution is exploring a novel field of study concentrating on the digitally focused business model innovations of professional clubs, unlike most football business model analyses that focus on leagues. We have concluded that clubs can and should apply business innovations to look for more financially sustainable operations, even without necessarily waiting for changes to be made in the generic competitive structure they perform in.
... The authors (Arnold, 1991;Szymanski, Kuypers, 1999) found that sporting success infl uenced positively revenues and salaries. L. Sánchez (Sánchez et al., 2020) states that profi tability and success on the football pitch may be connected in many ways. Sports success may lead to profi ts because victories on the pitch attract fans to the stadiums and increase attention from the media. ...
This article aims to build a general valuation model that can be applied by investors and current shareholders of professional sport clubs from different countries and leagues. The study is based on panel data on the valuation of soccer clubs published annually by Forbes. Authors analyze all value-drivers that were used previously, expanding the time horizon (number of observations) and incorporating various models including linear and non-linear mixed effect regressions. The best performance is obtained using a mixed-effect model with treebased fi xed part. The following determinants were found signifi cant for the fi xed effect: revenue and number of Google search requests. Analysis of actual deals in 2015–2020 confi rms the model’s predictive ability. It is also shown that since Forbes overestimates the market value of soccer clubs, the proposed model predicts an upper bound on the real value. In this regard, transactions with real value exceeding the estimates are of particular interest. A deeper analysis of such transactions allows to identify additional “non-soccer” factors affecting the deal. Therefore, the proposed model can serve as a tool for the rapid assessment of a soccer club based on open data.
... First, this can affect the relationship of the football clubs with their stakeholders as fans or local communities. Giving that financial and sporting performance are not related, asSanchez et al. (2020b) found, profit-seeking owners would clash with the interests of those stakeholders. Second, these new owners would prefer the establishment of a competition with less variability of the revenues, in order to obtain better profitability and reduced financial risks. ...
Purpose: The aim of this paper is to determine whether football clubs are valued according to financial parameters, as in other profit-seeking investments, or depending on the subjective preference of the buyers, in situations where buyers seek emotional rewards or a status symbol.
Design: This work analyses a unique data set of the prices of actual transactions of shares from clubs in the big European leagues from 2001 until 2019. A theoretical model is presented introducing financial, sporting, and localisation variables to study their influence in market value.
Findings: We have found that the valuation of football clubs in acquisitions is influenced by financial parameters, as in other profit seeking investments, and does not depend on the subjective preference of the buyers.
Practical implications: Our findings show the end of the alignment of interests between new football owners and fans or current organisers of competitions, due to the preferences of the new investor profit-seekers of an American model of sport.
Research contributions: The ownership of football clubs in the big leagues has changed dramatically in the last years. For the first time, to the best of our knowledge, the present paper demonstrates the opportunity of analysing the valuations of the football industry with actual data from the transactions.
Keywords: sport economics, football, valuation, firm ownership, sport management, investment
... According to Sánchez et al. ( 2020), profitability and success on the pitch are connected in many ways. Sports success may lead to profits because wins attract fans to stadiums and increase media attention. ...
... According to Sánchez et al. ( 2020), profitability and success on the pitch are connected in many ways. Sports success may lead to profits because wins attract fans to stadiums and increase media attention. ...
... Specifically, (i) the amateur sport could differ substantially from the professional sport when the ability of athletes to respond to external stimuli is concerned [13][14][15]; (ii) fans' reactions could depend on the sport, season, and even the match or event in question [16]; (iii) the economic condition of the clubs could affect the performance of athletes [17]; (iv) supporters can often express disappointment during a match or sporting performance [2]; and (v) other psychological, social, and cultural variables could unpredictably alter sports performance [18][19][20]. Since the enormous damage caused by COVID-19 from a psychological point of view falls into the latter category of bias [21,22], it is necessary to interpret all the evidence found with caution. ...
Background: The role of cheering in home advantage in sports performance is unclear. As anti-coronavirus disease 2019 (COVID-19) restrictive measures have prevented crowds from entering stadiums, analysis of the past two football seasons can reveal important details.
Objective: This paper aims to compare the last two football seasons in Italy with the previous six, highlighting changes due to the absence of cheering.
Methods: We compared the average percentages of points obtained in home matches from 2013 to 2019 with those in the timelapse 2019-2021. The same operation was performed with referee statistics, such as fouls, penalties, and cards awarded against home teams. To do this, we used Welch's t-test and percentage increases. Pearson and Spearman's correlations were searched between the percentages of points collected in home matches and total points earned from 2013 to 2021.
Results: The average percentage of points collected by teams in home matches dropped by 8% (Welch’s t = −4.3). The negative correlations between home collected points and total points in 2013-2019 timelapse have significantly diminished during the last two seasons (Welch’s t = 6.2), approaching zero. Penalties against home teams have increased by 30% (Welch’s t = 2.6), reaching 51.4%.
Conclusions: This research provides statistical evidence supporting the crowd’s impact on sports and refereeing performance in Serie A. However, our results also suggest that part of the home advantage is linked to factors independent of the audience. Future research can deepen the above phenomena from a theoretical-psychological point of view.
Purpose
Professional football clubs, like other businesses, need to make investments in both human capital and fixed capital. We examine how investments in players, managers and stadiums drive football club performance.
Design/methodology/approach
Using data from the English Premier League (EPL) from 2012 to 2021, we use a lag model to relate investments in the past two years to the current financial and sporting performance of clubs.
Findings
We find that investments in new players are associated with better subsequent sporting performance. A £100 million increase in transfer expenditure is associated with 12 more points and 4 better table positions over the following two seasons. Investments in stadiums are associated with better subsequent financial performance. An increase in stadium capacity by 10,000 seats is associated with an extra £26 million in profits over the next two seasons. Manager changes are associated with better sporting performance in non-Big Six clubs, but worse sporting and financial performance in Big Six clubs.
Originality/value
These results have implications for optimal investment strategies at professional football clubs. For example, we find that new managers in Big Six clubs need to be complemented by additional transfer expenditure of at least £135 million to maintain the same level of sporting performance.
The objective of this paper is to analyse the ownership of the Big Five (Big 5) leagues in Europe, the effects of fans' participation in the ownership of their clubs and how governance in European football can improve. The different structures used by fans to participate in the ownership of the clubs in the Big 5 leagues are analysed by showing the main features of ownership in the main leagues. The best practices of governance are identified, such as the protection of small shareholders, enhanced majorities for strategic decisions, two-tier boards with investors and fans, establishing fan representation by delegates or associations, and the limitation of voting rights or premium rights for seniority shareholders. Moreover, some flaws of the current structures should be avoided because these flaws hinder the raising of capital, increase the incentives to engage in risky management and reduce the incentives of fans to purchase shares.
This paper analyzes whether the Financial Fair Play (FFP) regulations set by Union of European Football Associations (UEFA) have influenced the auditing fees charged to football clubs. In addition, it explores the determinants of audit fees. We used a two-sample t-test with equal variances to determine whether differences are present. After this, we carried out a panel data regression with the clubs fix effect to estimate the determinants of audit fees in football clubs. Our findings revealed an increase of audit fees after the implementation of FFP regulations. On top of that, audit fees were explained by the presence of foreign investors if the audit firm was one of the Big 4 and if the auditor was a woman. The regulation change has had an impact on the audit fees charged by auditors for their services. However, this increase may be compensated over future years given the improving financial situation of clubs; therefore, the auditors’ risk diminishes and subsequent audit fees may be reduced. UEFA should monitor audit fees as well as the quality of the audit reports, which have become crucial to obtaining the license to participate in UEFA competitions.
The recent transformation of football clubs to businesses and the challenges posed by this transformation motivate us to study the financial, business, and sports performance of French football clubs. We propose a two-stage method that can be applied to other settings, especially when there exist sample size and theoretical/model specification issues: first, Multicriteria Analysis is used to rank clubs on their financial and business performance dimensions; second, these rankings and the league standing (capturing sports performance) are used to assess the interrelationships of the different dimensions by means of a Partial Least Squares Structural Equation Modeling Approach. We find an amphidromous positive relationship between business performance and sports performance, and a one-way inverse relationship where financial performance affects sports performance. Put simply, more revenues affect sports achievements positively and these in turn impact positively on revenues in a virtuous cycle. The higher revenues do not aid financial performance given a race for success that can be possibly augmented by stakeholder myopia: the inherent to the sport pursuit of short term objectives to the detriment of long term sustainability. Consequently, the role of regulators (national authorities, UEFA Financial Fair Play) as custodians, is ever more important in protecting clubs from financial distress.
When introducing UEFA’s Financial Fair Play (FFP) it was argued that as a beneficial side effect competition in European football leagues should become more equilibrated and perceived as being fairer. Based on a hand-collected dataset on league results, player market values as well as investor payments of more than 300 European football clubs, we scrutinize the impact of FFP on the competitive landscape in major European football leagues. By applying a fixed-effect panel regression difference-in-differences approach, we find results that are consistent with the view that FFP might have further amplified the competitive imbalance. This might be caused by the fact that FFP raises some barriers against the entrance of new investors. Moreover, we present evidence that FFP supports the former season’s winner in terms of budget shares in the upcoming season. Overall, our results support the view that FFP turns European football leagues less equilibrated and even tends to freeze current hierarchies.
This paper aims to analyze how ownership influences the performance of European football teams. The study of efficiency allows us to identify relative performance in the achievement of several objectives, as is the case of football teams pursuing both financial performance and sports success. The analysis shows that football teams organized as members clubs, with dispersed ownership and uncontrolled by foreign investors perform better. Thus, property structures facilitating less control over managers relate positively to performance.
This paper aims to investigate the relationship between the financial and the sports performance of Italian football teams. To achieve this aim, a panel data analysis was performed, using financial statements and data from sports results. The panel dataset covers seven seasons (from 2007–2008 to 2013–2014) and 29 clubs that belong to the Italian “Serie A.” The results indicate positive effects between the expenses for football players’ salaries and the clubs’ sports performance but no significant effects between player transfer fees and sports performance.
The aim of this study was to determine the relevant management variables that explain the performance of Spanish football clubs in the First Division. To do so, a comprehensive analysis of the literature was carried out on the contents relating to the variables associated with the management of football clubs. Thereafter, the contents were grouped into six thematic sections that a group of experts verified as a validity check and to give a collective consensus on the variables and models to further research. For the empirical study we worked with data from the football clubs in the Spanish First Division between seasons 2007-2008 and 2009-2010. Finally, a regression analysis was conducted on the data to understand and verify the proposed models. The paper concludes that, individually, the existence of an address and / or department operations; gains in the previous season; the number of games played in European competitions; and the league position reached; significantly affect net profit. Also, the number of European players, financial expenses and net profit of the previous season, act as a joint model that would affect the chances of profit for the clubs. © 2016, Universidad Catolica San Antonio Murcia. All rights reserved.
RESUMEN: El presente trabajo estudia la influencia de las estructuras de propiedad de los principales equipos de fútbol europeos en su rentabilidad. Los resultados obtenidos muestran que la propiedad dispersa y nacional de un equipo tiene una relación positiva con su rentabilidad financiera. Por otra parte, el hecho de que los equipos se organicen como clubes o como sociedades mercantiles no parece influir en su desempeño económico.
ABSTRACT: The present paper attempts to study the influence of the ownership structures of the major European football teams in their own profitability. The results show that the dispersed and national ownership of a club has a positive relationship with their financial profitability. However, the fact that the teams are organized as corporations or clubs does not influence their economic performance.
This article investigates the influence of local market size on playing success in professional Spanish football. In order to examine this relationship, several regressions were run for linear, beta and fractional logit models, using various proxies of local market size as explanatory variables. The evidence emerging from our analysis suggests that the advantage of big-market teams results in substantial dominance by a very small group of clubs. Nevertheless, this advantage does not actually prevent teams that are located in areas with a small market size from having at least regular opportunities for success. Furthermore, the econometric modelling and the evidence obtained provide a rational basis for supporting the idea of promoting the creation of a cross-national league in Europe (the European Superleague).
All over Europe, professional football clubs have been transformed into profit oriented incorporations and
their performances have been judged on and off the field of play. Football has begun to be considered as a business in
Turkey mostly as of late 90’s. In this study, we investigate the possible impact of the financial performances of
incorporations on the sportive performances in the domestic league for the four major football clubs in Turkey, namely
Beşiktaş, Fenerbahçe, Galatasaray and Trabzonspor over the period 2002-2009. In order to carry out this study, we use
variables from the financial statements of these clubs’ incorporations as a measure of their financial performances and
sportive results obtained in the domestic league as an indicator of the sportive performance using a Spearman
correlation model. The results of this study indicate that it appears to be no correlation between the sportive
performances of the clubs and financial performances of their incorporations in the above mentioned period.
Key Words: Football, incorporation, financial performance, sportive performance, Turkey
In the present study we examine the profitability of the football clubs participating in the first division of the Greek Football League, as well as the factors that contribute to this performance, over the period from 1994 to 2004. The results indicated that the profitability of the football clubs is positively associated to their short run success, but not on the long run success and seasonal uncertainty of the league. Additionally, the size of the club, measured as a fraction of the club's assets, is a distinct factor which affects the financial performance positively. Finally, the level of asset turnover and ROA reported by the clubs proved to have a significant positive impact on profitability suggesting that those football clubs that are able to use their assets efficiently, are more resourceful by means of profitability.
This essay discusses why many European football clubs have experienced financial problems, despite earning high revenues. The fact that European football clubs are win maximizers make them more aggressive when competing for talented players than professional teams on other continents. So-called eyes of a needle, such as promotion, (avoiding) relegation and qualifying for international tournaments strengthen the cost push effects. Due to the free movement of labour, any regulations have to be implemented simultaneously across the whole of Europe. Achieving such unilateral agreement in 52 national leagues is difficult. European football has a history of powerful clubs that are not favourable to regulations that can reduce their advantages. A game-theory approach illustrates the mechanisms that lead European clubs to spend more resources than they can afford. Additionally, this part offers a new and hopefully interesting explanation, besides objective function differences, when it comes to understanding micro differences between US and European sports.
This paper shows the current financial situation of Spanish professional football. Different financial ratios are used in order to classify the financial position of the different teams. The study has been split between clubs in First or Second division. We also analyze the relationships between the size of market, team payrolls, and team performance. We demonstrate the financial problems created by the arms race that clubs have started for getting the most talented players for trying to get the best possible sporting outcome. The new Spanish Law for companies in financial distress has implied that nine clubs are technically insolvent and under administration. We have searched for possible explanations of that situation. Nevertheless, our financial variables do not explain the likelihood that a club goes into administration.
This paper investigates the relationship between playing success and commercial success in team sports. Utilizing a data set relating to the English Premier League that combines both financial measures and indicators of playing skills and performances, our empirical analysis is based on three behavioural equations. Our analysis indicates that on-field success can be directly related to players’ skills and abilities and that revenue is positively related to on-field success. Wage expenditure is also shown to systematically reflect player skills and performances. One interpretation of this evidence is that investment in players’ skills and ability buys on-field success, with richer teams becoming ever richer and able to maintain or even build upon success by spending more on players than less successful clubs. To the extent that richer clubs are successful in their objective there is a causal link between revenue earned and competitive imbalance via investments in players. The implications of this tendency within a league are discussed in our conclusion, which also considers the potentially wider implications of our study as they relate to the evolution of firm size and issues of market share.
The English (Association) Football League is a long established industrial cartel selling a highly popular product with only imperfect substitutes. Despite that, the majority of its member clubs lose money and the industry has faced successive financial crises over the last decade. This paper develops an empirical model of the financial performance of English League clubs using a high quality dataset of 48 clubs over the period 1974-89. The underlying model explains how rents are competed away through the maximising behaviour of club owners subject to production constraints. This model is parameterised by a system of equations which describe the behaviour of a maximising owner subject to demand and production constraints. The model is then used to examine the coordination failure which lies at the heart of the English Football League's decline and to assess the prospects for the Premier League.
The link between team payroll and competitive balance plays a central role in the theory of team sports but is seldom investigated empirically. This paper uses data on team payrolls in Major League Baseball between 1980 and 2000 to examine the link and implements Granger causality tests to establish whether the relationship runs from payroll to performance or vice versa. While there is no evidence that causality runs from payroll to performance over the entire sample period, the data shows that the cross section correlation between payroll and performance increased significantly in the 1990s. As a comparison, the paper examines the relationship between pay and performance in English soccer, and it is shown that Granger causality from higher payrolls to better performance cannot be rejected. We argue that this difference may be a consequence of the open market for player talent that obtains in soccer compared to the significant restrictions on trade that exist in Major League Baseball.
English football began taking steps towards becoming a business earlier than Spanish football did, and academic studies on the football industry to date also focus primarily on football in the UK. The evidence for the relationship between sports performance and revenues appear clear in English football. There is even research about the effects of a club’s wealth on its sports performance, or the effects of a club’s sporting situations on its finances. In this paper, we ana-lyse the relationship between sports performance and the revenues of football clubs as well as the effect of sports performance on the financial results in Spanish professional football. In order to carry out this research we have had to select which variables to analyse and choose the most appropriate methods of measurement. We have designed a system which obtains a variable of sports performance that includes information from every competition in which the foot-ball club participates.
overid computes versions of a "Sargan" or "Basmann" test of overidentifying restrictions for a number of instrumental variables estimators of an overidentified equation: a model in which the number of instruments exceeds the number of regressors. The estimators include instrumental variables regression (ivreg or ivreg2), instrumental variables probit (ivprobit, twostep), instrumental variables Tobit (ivtobit, twostep) and three-stage least squares (reg3).
A primary prediction of the theory of sports leagues is that teams with higher revenues will have higher league positions or winning percentages than teams with smaller revenues. Behind this prediction lies the key influence of market size, yet this has been underexplored in the empirical literature on sports leagues. This paper combines detailed census of population data with panel data on team performance for an open sports league, the English Football League, to test the hypothesis that market size matters for team performance. We find a particularly important role for population close to the team's location. The impact of local population is reduced but not eliminated when allowance is made for entry in the form of competition from neighboring clubs. We assess implications of these findings for both European and North American sports league structures.
This study uses a unique database of financial accounts for English football clubs between 1974 and 2010 to examine the process by which firms fail, which in this context means entering insolvency proceedings. From the data it is possible to estimate shocks to demand and productivity and to show that failing firms typically experience a series of negative shocks. This is consistent with the standard IO theory models of exit.
Research question: In this study we analyse whether ownership concentration serves as a corporate governance (CG) mechanism for professional football clubs in Europe and show its impact on clubs’ sporting performance. Based on stakeholder salience theory, we examine how investors exert their salience and which objectives they follow. Specifically, we differentiate between economic and sporting investor types and examine whether economic investors act as a CG mechanism.
Research methods: We employ a database of 160 privately and publicly owned football clubs in Europe for the period 2002–2015 to measure the effects driven by ownership concentration after controlling for endogeneity based on a dynamic panel generalised method of moments.
Results and findings: The results indicate that economic investors favour sporting over economic performance. We conclude that the investments in player talent are made under high risk of outcome uncertainty and economic investors do not, or to a lesser extent, monitor club managers’ actions and do not serve as a CG mechanism.
Implications: This implies a need for football clubs’ investors to redefine their role to ensure a functioning governance system. The results further imply that archival CG research in football clubs should acknowledge the dynamic relationship between CG mechanisms and a club’s performance.
http://www.emeraldinsight.com/doi/abs/10.1108/CG-07-2016-0146
This paper analyses the relationship between ownership structure and financial performance in the five major European football leagues from 2007/08 to 2012/13 and examines the impact of the Financial Fair Play (FFP) regulation. The sample used is comprises of 94 teams that participated in the major European competitions: German Bundesliga, Ligue 1 of France, Spanish Liga, English Premier League and the Italian Serie A. The estimation technique used is panel-corrected standard errors (PCSEs). The results confirm an inverted U-shaped curve relationship between ownership structure and financial performance as a consequence of both monitoring and expropriation effects. Moreover, the results show that after FFP regulation, the monitoring effect disappears and only the expropriation effect remains. Summary This study tries to provide direct evidence of the impact of large majority investors in the clubs and FFP regulation on the financial performance of football clubs.
1. Research objectives
The European market for football club investors is undergoing a significant transformation, with German clubs opening up for strategic investors, French clubs being taken over by private majority investors, and English top-league clubs experiencing an influx of foreign investors. Economic and legal politics have played an important role in the deregulation of closed member associations.
2. Research methods
This paper aims to summarize the history and market situation of the ‘Big Five’ European leagues, review available theory and empirical evidence on incorporations and public and private investors, and suggest research gaps that deserve further attention. The authors have also constructed a unique database covering all owners in the two premium divisions in England, France, Germany and Italy for the period from 2003 to 2014.
3. Results and findings
The available articles in the growing research field of football club investors cover various theoretical areas, such as the application of property rights theory to European football clubs. In addition, several empirical papers analyze the financial and sporting impact of domestic and foreign private investors and public listings. All these studies highlight the increasing importance of club ownership in the rat race of European football.
4. Implications
Nevertheless, some research gaps remain to be studied at an appropriate depth. First, further empirical studies should analyze the impact of incorporations in German football and the entry of private majority investors in France. Furthermore, future research may address the paradox of de-listings in England and additional listings in continental Europe. Finally, this article identifies the impact of foreign investors and multi-ownership synergies as promising research fields. In this respect, the article provides some managerial implications for football club owners, managers, and regulators.
Research question: European football clubs are known for an institutionalized management culture which prioritizes on-field success over financial performance. This creates an extremely competitive context within which most clubs operate, producing debts and deficits. However, in order to secure clubs’ long-term financial viability, Union of European Football Association (UEFA) has introduced regulatory and monitoring processes tied to accounting data in order to assess clubs’ financial performance. This study aims to determine whether UEFA’s framework has an impact on clubs’ management policies with regard to accounting quality. Research methods: The study employs a sample of 109 European football clubs for a seven-year period, 2008–2014 (three years before and four years after the regulatory intervention), to investigate the impact of the reform upon management practices related to accounting. Following prior literature, we employ the three most commonly used proxies of accounting quality: earnings management, conditional accounting conservatism and auditor switching. Results and findings: This study demonstrates that, at the expense of accounting quality, club management seeks to promote the image of a financially robust organization in order to secure licensing and, consequently, much needed funding from UEFA. In this manner, the dominance of a management culture which impairs financial performance is further cemented. Implications: UEFA should take into consideration that, in a financially distressed industry focused on achieving success on the field of play, the imposition of regulatory monitoring tied to accounting data inevitably leads to a loss of organizational credibility and transparency. Hence, UEFA’s intervention should be accompanied by the imposition of a corporate governance framework which would aim to rearrange club management priorities by facilitating a change in institutionalized mentalities.
The resource-based view explains sustainable competitive advantage as the consequence of an organization's endowment of unique and imperfectly replicable resources. Superior organizational performance, however, depends not only on the organization's resource endowment but also on the efficiency with which the resource endowment is used. In this article a resource-utilization model of a professional sports team is developed in which teams optimize the stock of athletic resources (i.e., playing talent), subject to ownership preferences, over sporting and financial performance. The resource-utilization model is used to analyze the factors influencing the team's current endowment of athletic resources and evaluate the efficiency with which teams utilize both their athletic and allegiance (i.e., fan base) resources to achieve sporting and financial targets. Empirical evidence is presented on the sporting and financial performance of English professional soccer teams in the FA Premier League over the period 1998-2002. It was found that the financial performance of teams is significantly affected by their ownership status.
The scope of this paper is to examine the relation between the athletic and financial performance of Greek football clubs and how the investment in player contracts (playing talent) impacts this relation. We selected a sample of 20 football clubs participating in the three professional divisions of the national championship, which refers to the period from 2004/05 to 2008/09. By applying a panel data methodology, results indicated that the higher the investment in player contracts is, the more successful is the club on the field. However, as the investment in player contracts by football managers is increased, the club is becoming more unprofitable and insolvent suggesting that these decisions are not based on economic standards, a fact which verifies previous arguments that football clubs in Europe aim to maximise the athletic performance and not the financial. Useful policy implications and avenues for future research are also provided.
In simple though approximate terms, the two-stage least squares method of estimating a structural equation consists of two steps, the first of which serves to estimate the moment matrix of the reduced-form disturbances and the second to estimate the coefficients of one single structural equation after its jointly dependent variables are “purified” by means of the moment matrix just mentioned. The three-stage least squares method, which is developed in this paper, goes one step further by using the two-stage least squares estimated moment matrix of the structural disturbances to estimate all coefficients of the entire system simultaneously. The method has full-information characteristics to the extent that, if the moment matrix of the structural disturbances is not diagonal (that is, if the structural disturbances have nonzero “contemporaneous” covariances), the estimation of the coefficients of any identifiable equation gains in efficiency as soon as there are other equations that are over-identified. Further, the method can take account of restrictions on parameters in different structural equations. And it is very simple computationally, apart from the inversion of one big matrix.
The data envelopment analysis technique is used to measure franchise payroll efficiency in the National Football League (NFL) from 1981 to 2000 and Major League Baseball (MLB) from 1985 to 2001. This article shows that there is a significant difference in the level of franchise inefficiency between MLB and the NFL because of the different financial structure in these leagues. MLB franchises, with little revenue sharing and no salary cap, tend to be less efficient than NFL franchises. Big spending and inefficient MLB franchises tend to come from large media markets, although this is not the case in the NFL. This article also shows that NFL franchise efficiency significantly improved after the salary cap was introduced in 1994.
Attendances at Football League matches have declined steadily since the war, giving an impression of an industry in decline. Attendances are not, however, synonymous with club revenues, or even gate receipts. Two general linear models have been constructed which identify the significant determinants of ‘real’ gate receipts and wages. In particular the tests reveal that inflation-adjusted gate receipts are a positive function of time. These findings indicate that the market position or revenue-raising capability of the industry may be more robust than indicated by the widely publicised downward trend in League attendances.
Football is now a big industry worth studying in its own right: but it is also an excellent laboratory for studying success. The author argues that this is partly because, in contrast to say, American Football, there is less equalisation of resources between the clubs and English football is a highly competitive market. This article discusses one of the most successful clubs ever and argues that the reasons behind its success do not characterise football generally. It discusses how the different kinds of success in the English football industry are related to business success generally.
We employ a model of n heterogenous profit-maximizing clubs to analyze the impact of revenue sharing in professional sports leagues on competitive balance. Revenues of each club depend on absolute quality, relative quality and on competitive balance itself so that our model captures much of the preceding literature as special cases. We show that revenue sharing always increases competitive balance if clubs differ only with respect to the impact of absolute quality on revenues. On the contrary, revenue sharing reduces competitive balance if only clubs' relative qualities play a role for revenues or if only two teams are considered.
This article investigates wage determination among professional soccer players appearing in the Italian league. Given the popularity of "top" soccer players, the relationship between individual productivity and pay can lead to "superstar" effects. In that context, the marginal revenue product of a soccer player is related to the extra price that a spectator is willing to pay to see him play (live or on television) times the number of spectators who are attracted. The authors use rare data on individual earnings and other personal characteristics of a set of soccer players in the 1995-1996 Italian league season to estimate human capital earnings equations and test for superstar effects in wage determination via convexity of earnings in performance. Earnings are found to be highly convex in two performance measures after controlling for a set of personal characteristics and team fixed effects.
In this paper we estimate the best responses of soccer clubs to the choices of other clubs in Spanish and English leagues
over the period 1994–2004. We find that choices are more closely approximated by win maximization than by profit maximization
in both leagues. We examine club characteristics that might explain variations in choices between Spanish clubs.
Using the team performance-club profit framework, a formal model is developed of the determination of the transfer fees paid by football clubs when players are traded for cash. It is argued that transfer fees can involve monopoly rents; the selling club extracts a share of the nonnegative differential between its reservation price and the buying club’s maximum bid-price. It is shown that a necessary condition for the presence of monopoly rents can be established by testing whether buying-club characteristics are jointly significant determinants of transfer fees after controlling for player characteristics, time effects and selling-club characteristics. Using a sample of 1,350 English professional football transfer fees covering the period June 1990 to August 1996, it is found that monopoly rents may exist but the degree of monopoly rents may differ with the size of the transfer fee.
This paper examines the structure and direction of developing Asia’s trade over the past two decades. The impacts on developing Asia of the economic slowdown in 2009–2010 in high-income countries of the Organization for Economic Cooperation and Development (OECD), which includes the European Union (EU), Japan, and United States (US) are projected through a computable general equilibrium model (CGE) of world trade and production. In addition, the impacts of fiscal stimulus and the rise of protectionist sentiments within developing Asia are examined. The expansion of intraregional trade in Asia reflects the role of the People’s Republic of China (PRC) as an assembly point and its reliance on demand from outside the region, the EU and the US in particular. The trade channel is crucial in transmitting economic distress from the OECD countries to developing Asia. The projection shows that developing Asia will continue to suffer from demand decline in OECD countries, with the PRC and India being the most impacted. Though Southeast Asia faces reduced exports to the OECD countries, its exports are reduced significantly to other Asian exporters, demonstrating the indirect trade linkages that now exist in the global economy. Fiscal stimulus from the largest economies (including PRC, EU, Japan, and US) could help boost trade and gross domestic product growth in developing Asia but it is not projected to offset entirely the negative impact from the global economic downturn. Protectionism has a negative impact on the countries and regions that take that course. Southeast Asia would be the most impacted by protectionism. If Southeast Asian countries were to raise their applied tariffs to the maximum most-favored nation bound rates under the World Trade Organization, the impact would be negative on real gross domestic product. Heavy manufactures followed by light manufactures, electronics, and textiles are most impacted.
This paper considers the issue of team viability and professional franchise relocation, a problem common to all major sports leagues in North America. Specifically, using the National Hockey League in the 1990s as the analytical vehicle, the proposition that the viability of Canadian Small Market Franchises (SMF) is in doubt because of a combination of inadequate revenue (due to the quality of their locations) and escalating salary cost, is examined. Using game by game data for the 1989/90 season, revenue, costs and profits by team were estimated and it was concluded that Canadian SMF are indeed an endangered species. Several alternatives which might rectify the problem are considered (revenue sharing, salary caps, public subsidy), but none are as attractive or as realistic as relocating south to US cities. The behaviour of SMF in the 1990s is consistent with this prognosis.
A primary prediction of the theory of sports leagues is that teams with higher revenues will have higher league positions or winning percentages than teams with smaller revenues. Behind this prediction lies the key influence of market size, yet this has been underexplored in the empirical literature on sports leagues. This paper combines detailed census of population data with panel data on team performance for an open sports league, the English Football League, to test the hypothesis that market size matters for team performance. We find a particularly important role for population close to the team's location. The impact of local population is reduced but not eliminated when allowance is made for entry in the form of competition from neighboring clubs. We assess implications of these findings for both European and North American sports league structures.
checkreg3 checks whether the coefficients of a linear simultaneous equations system to be estimated by reg3 are identified by the rank condition.
Past comparative work argues that the differences between European and North American sports dramatically outweigh any similarities. This paper explores the arguments that fans, sports organizations, and team objectives are different in the two regions and offers a set of questions that must be answered if, indeed, the opposite is not true. In addition, insights gained from the overriding similarities are offered concerning competitive balance, life after the Bosman decision, broadcasting, and league structure in Europe. European sports are far from any tragic end, but directors of sports organizations have seen the handwriting on the wall, economically speaking. They are about to live in lively times. Copyright 2000 by Scottish Economic Society.
This paper employs data for the 1993-94 season to estimate a hedonic equation representing the determination of the price structure in the transfer market for professional players in the English football leagues. Player transfer proneness is modelled, and the Heckman two-step procedure is employed to take account of selection bias. The paper identifies those player attributes which affect either the probability of transfer or the transfer fee and evaluates the relative influence of such variables. Copyright 1999 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research
Pay dirt: The business of professional team sports
- S Morrow
Morrow, S. (2003). The people's game?: Football, finance and society. Berlin: Springer.
Quirk, J. P., & Fort, R. D. (1997). Pay dirt: The business of professional team sports. New
Jersey: Princeton University Press.
Winners and Losers: The business strategy of football
- S Szymanski
- T Kuypers
Szymanski, S., & Kuypers, T. (1999). Winners and Losers: The business strategy of
football. London: Vicking.
- L C Sanchez
L.C. Sanchez et al. / European Research on Management and Business Economics xxx (2019) xxx-xxx