Abstract
Despite the globalisation of European soccer, each professional league exhibits specificities. French Ligue 1 sometimes contends with the trading-off of financial performance against sporting performance of its teams in European soccer competitions, and its inner auditing body, the Direction Nationale du Contrôle de Gestion (DNCG), is in charge of controlling clubs’ financial accounts. Moreover, Ligue 1 operates with one of the best competitive balances in the Big Five, which is detrimental to its clubs’ success at the European level. However, the league and a number of clubs have not been able to curb payroll inflation and have not avoided being recurrently run in a deficit and accumulating debts, in particular payment arrears and player transfer overdue. Lax management occurs, since very few clubs have been sanctioned by a payment failure, even fewer by liquidation, and there has been no bankruptcy. The concept of a soft budget constraint theoretically encapsulates such empirical evidence. The novelty of the paper is to establish a link between the soft budget constraint and the players’ labour market where it crucially triggers market disequilibria: an excess of demand for superstars’ talents and an excess of supply for journeymen players are modelled. Data paucity about player individual wages hinders econometric testing of the aforementioned link and the model. However, a look at transfer fees that concentrates on a few of the top European soccer clubs provides a first insight into the arms race for talent that fuels an excess of demand for superstars and dips a number of clubs’ finance into the red.
Highlights
The globalisation of European football started up in the 1990s
In 1999, following a failed attempt by Media Partners to launch a European football super league, a dramatic change in the format and financial endowment of UEFA (Union of European Football Associations) competitions completed the transformation of the economic model in a number of professional football clubs and leagues, in particular those benefiting from the new money godsend
This is in no way specific to French professional football, and can be encapsulated into more general disequilibrium modelling (Section 4) that opens up an avenue for further research and empirical testing of the relationship between lax financial disciplines on the one hand and, on the other hand, skyrocketing payroll and transfer fee inflation in the case of superstar players
Summary
The globalisation of European football (soccer) started up in the 1990s. The labour market for football players was fully liberalised as a result of the Bosman case (1995), a liberalisation that was extended to most developing countries by an international agreement called the Lomé Convention (2001). French professional football Ligue 1 is a case in point, namely as regards its trade-off between financial and sporting performance (Section 1), evolving financial structure, and management of deficits and debts (Section 2), payment arrears, and payment failures (Section 3). Such a recurrent situation can be conceptualised with the notion of a soft budget constraint that rules the economic model of clubs in an open league system; the soft budget constraint paves the way to a disequilibrium labour market for talent: players. This is in no way specific to French professional football, and can be encapsulated into more general disequilibrium modelling (Section 4) that opens up an avenue for further research and empirical testing of the relationship between lax financial disciplines on the one hand and, on the other hand, skyrocketing payroll and transfer fee inflation in the case of superstar players
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