English Football Industry Research Articles

Too big to fail? Accounting for predictions of financial distress in English professional football clubs

PurposeThis paper analyses English Premier League (EPL) and English Football League (EFL) championship clubs during the period 2002–2019 to anticipate financial distress with specific reference to footballs' Financial Fair Play (FFP) regulations.Design/methodology/approachData was collected for 43 professional football clubs competing in the EPL and Championship for the financial year ends 2002–2019. Analysis was conducted using the Z-score methodology and additional statistical tests were conducted to measure differences between groups. Data was split into two distinct periods to analyse club finances pre- and post-FFP.FindingsThe results show significant cases of financial distress amongst clubs in both divisions and that Championship clubs are in significantly poorer financial health than EPL clubs. In some cases, financially sustainability has worsened post-FFP. The “big 6” clubs – due to their size – seem to be more financially sound than the rest of the EPL, thus preventing a “too big to fail” effect. Overall, the financial situation in English football remains poor, a position that could be exacerbated by the economic crisis, caused by COVID-19.Research limitations/implicationsThe findings are not generalisable outside of the English football industry and the data is susceptible to usual accounting techniques and treatments.Practical implicationsThe paper recommends a re-distribution of broadcasting rights, on a more equal basis and incentivised with cost-reduction targets. The implementation of a hard salary cap at league level is also recommended to control costs. Furthermore, FFP regulations should be re-visited to deliver the original objectives of bringing about financial sustainability in European football.Originality/valueThe paper extends the evidence base of measuring financial distress in professional team sports and is also the first paper of its kind to examine this in relation to Championship clubs.

Making sense of the sack race: the impact of managerial change in the English Football League

PurposeThe purpose of this paper is to examine the effect of managerial change in the English football industry. The authors’ theoretical discussion covers three contrasting concepts that attempt to explain the association between manager change and organizational performance (scapegoating theory, vicious circle theory and tenure and life-cycle theory).Design/methodology/approachData were collected for the four main English Football Leagues (EFLs) between 2000/2001 and 2015/2016. A total of 2,816 football matches were included in the study and during this time 525 instances of managerial change were observed. Analysis was conducted using relevant statistical techniques to examine the impact of managerial change on performance.FindingsThe results show significant differences in all four EFLs when considering teams who make a managerial change and those who do not. Further analysis revealed that a managerial change is more beneficial for clubs in the bottom half of the league, particularly for the English Premier League.Originality/valueThe implications for clubs competing in English football are clear when considering the strategic direction of the club in respect of managerial change and its impact on team performance. Yet, our findings come with a warning. The findings do not infer direct cause and effect here, and any board decision should consider additional factors other than sporting performance before deciding to sack their manager.

Book Reviews

Paola D'Orsogna of Procura Federale, Federazione Italiana Giuco Calcio and Gianmarco I. P. Ottaviano of London School of Economics and Political Science review “Football Economics and Policy” by Stefan Szymanski. The EconLit abstract of the reviewed work begins, “Eleven previously published papers present economic analyses of policy issues surrounding European football. Papers discuss the English football industry--profit, performance, and industrial structure; the market for soccer players in England after the Bosman judgment--winners and losers; the Americanization of European football; hearts, minds, and the Restrictive Practices Court; broadcasting, attendance, and the inefficiency of cartels; a market test for discrimination in the English professional soccer leagues; the financial crisis in European football--an introduction; English football; income inequality, competitive balance, and the attractiveness of team sports--some evidence and a natural experiment from English soccer; the Champions League and the Coase theorem; and the economic impact of the World Cup. Szymanski is Professor of Economics with Cass Business School, and runs the Sports Business Network, at the City University of London. Index.”

Why is Manchester United So Successful?

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.

The English Football Industry: profit, performance and industrial structure

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.