Financial Fair Play Regulations Research Articles

Market-Internal Financial Regulation in Sports as an Anticompetitive Institution

Financial regulation in sports is usually discussed in the context of representing an instrument against “financial doping”. Notwithstanding the merits of this discussion, this paper takes the opposite perspective and analyses how market-internal financial regulation itself may anticompetitively influence sporting results. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Sometimes, the actual winners and losers of financial regulation stand in line with the (legitimate) goals of the regulation like limiting financial imbalances or preventing distortive midseason insolvencies of teams. However, financial regulation may also display unintended side-effects like protecting hitherto successful teams from new challengers, cementing the competitive order, creating foreclosure and entry barriers, or serving vested interests of powerful parties. All of these effects may also be hidden agendas by those who are implementing and enforcing market-internal financial regulation or influencing it. This paper analyses various types of budget caps (including salary caps) with respect to potentially anticompetitive effects. UEFA’s so-called Financial Fair Play Regulations are highlighted as an example. Furthermore, the paper discusses allocation schemes of common revenues (like from the collective sale of broadcasting rights) as another area of financial regulation with potentially anticompetitive effects. Eventually, the effects of standards for accounting, financial management, and auditing are discussed.

Does Fair Play Matter? UEFA Regulation and Financial Sustainability in the European Football Industry

In 2009 the Union of European Football Associations (UEFA) launched its Financial Fair Play Regulations (FFPR) aimed at preventing professional football clubs from overspending in the quest of sporting success to the detriment of their long-run financial sustainability. The rationale and the effectiveness of the FFPR have both been questioned, but only on theoretical grounds. We make a first attempt at bringing empirical evidence to this debate exploiting an original dataset covering 156 clubs playing in the top five European Leagues (those of England, France, Germany, Italy and Spain) in the period 2006-2015. We address two main questions: whether before 2009 there was indeed a problem of growing financial leverage for European football clubs, and whether after 2009 the financial leverage of European clubs has started decreasing. We find that the introduction of the FFPR is associated with changes in the financial sustainability of European football clubs that are consistent with the regulations’ intended effects. These changes are, however, rather weak and vary substantially across national leagues.

Football clubs’ profitability after the Financial Fair Play regulation: evidence from Italy

PurposeIn 2009, the Union of European Football Associations approved the Financial Fair Play (FFP) regulations. These regulations refer to the requirements of transparency and financial conditions for football clubs participating in European competitions. The purpose of this paper is to combine the managerial and the economic points-of-view in order to understand if Italian football clubs are ready to comply with the new FFP rules.Design/methodology/approachIn the analysis, the authors focus on the main Italian football league, Serie A. Using business model analysis, the authors determine what the main profit determinants of football associations are, through panel data for 15 clubs from 2011-2013. The authors then try to match the statistical and managerial approach.FindingsThe results show that the key contributing factors to profits are on the costs side. In particular, the most relevant expenses are player wages. The core revenue for clubs comes from the net profit from player trading, while other income, such as TV rights, commercial and match-day proceeds, have no statistical significance for profit formation.Research limitations/implicationsThe main limitation of the analysis is that the survey regarded only on Italian Championship. So it is deeply influenced by the competitive structure of the Italian league that is different from that of other European leagues. Therefore, the authors think that the future developments of this work could be the examination of another European Championship, for example, English Premier League, and the compared analysis of Italian league and other European one.Practical implicationsThere is a close-link between costs and profitability, and especially between expenditure on players and the ability to close the financial year with a profit. Clubs must address the issue of player wages in order to follow a path of economic recovery towards profitability.Originality/valueIn the work the authors put together managerial point of view and economical one, in order to understand how FFP can impact on profitability of football clubs. The authors use an empirical econometrics model to test the hypothesis about business model of Italian Clubs.

Impairment Test in the Football Team Financial Reports

The aim of the paper is to analyze the valuation and the application of the impairment test of intangible assets of Italian football teams.The purpose is to understand how and what kind of information each club discloses on their financial reports the values of player registrations. The study considers the evolution of the reports from the ruling of UEFA Financial Fair Play Regulations (UEFA, 2009) in the years 2010–2015.The study demonstrates that only some clubs have reached the beak-even goal and that only some teams give impairment test information in the statement and in the attached notes.

The state of EU sports law: lessons from UEFA’s ‘Financial Fair Play’ regulations

The EU’s sporting competence derives from the legal norm, established by the European Court of Justice, that requires that ‘sporting rules’ of sports governing bodies which have an economic impact and which breach the fundamental freedoms or competition law can only be justified if shown to be a proportionate response to an inherent need in the sport. However, the certainty of this norm is undermined by the EU’s subsequent Treaty competence for sport, a political compromise, which is ambiguous, and which in due course generated the European Commission’s sports policy, with its emphasis on governance and social dialogue. Consequently, EU sports law has evolved into ‘soft law’ which is far from coherent. This is demonstrated in the tolerance shown for certain of UEFA’s ‘sporting rules’, notably its Financial Fair Play Regulations, which restrict competition and lack proportionality yet have not attracted sanction from the European Commission (a sports law policy which could be characterised as not even constituting soft law but delegalisation).

Financial Fair Play in European Football: Economics and Political Economy - A Review Essay

The 2010 UEFA Club Licensing and Financial Fair Play Regulations (FFPR) constitute an enhancement of the Club Licensing System, originally introduced in 2004-2005 with the aim to regulate the world of European football and create a more competitive and level playing field. The aim of this paper is to review the economic studies that have so far investigated the subject of Financial Fair Play Regulations, in order to provide a comprehensive overview of their pros and cons. Starting from a common assumption - that football clubs are special firms for reasons of economics and political economy - all but one of the reviewed articles criticize FFPR, by focusing on the Break-Even Requirement (BER), i.e. the principle according to which relevant expenses must be matched by relevant revenues. The critiques fall into three categories, highlighting that on the one side FFPR are likely to produce inefficiencies in labour markets, and, on the other side, they are likely to trigger unfair competition in football leagues, as well as freezing existing hierarchies in European soccer. The paper analyzes each individual critique, as well as the respective counterarguments.

Legal Analysis on UEFA’s Financial Fair Play Regulations

Legal Analysis on UEFA’s Financial Fair Play Regulations

The union of European football association’s club licensing and financial fair play regulations - are they working?

Good governance of sport is of the highest importance, particularly in professional team sports, which require large expenditure to maintain a club’s position in a league. This has led to a number of clubs, such as Portsmouth in the English Premier League, being forced into administration. Furthermore, the Global Financial Crisis has emphasised the need for more appropriate and robust corporate governance, including for sporting bodies. The Union of European Football Association (UEFA), under its president, Michel Platini, has introduced Club Licensing and Financial Fair Play Regulations. They aim to bring greater security and financial viability to the management of European football. These Regulations focus on the non-payment of liabilities to other clubs, employees, and players, and the break-even requirement. These changes emphasise the need for European football clubs to meet their financial commitments in a timely manner and operate their clubs within their income revenue, rather than from loans or investments from wealthy club patrons or owners. The regulations seek to bring financial integrity and stability to European football. The Regulations seem to have achieved this and have generally been accepted by the clubs, but they are under legal challenge before the European Court. Meanwhile, the use of the Regulations in Australia would not be appropriate, as Australian sports, including football, have developed indirect means of curbing the financial spending of clubs through the use of salary and transfer fee caps.

Sports and competition law: the case of the salary cap in New Zealand rugby union

The legal environment of professional sports in Europe has been recently complemented by regulations adopted by sports federations and professional leagues aiming at preserving fairness in sports competitions and/or the economic viability of this sector (like the salary cap put in place in French professional rugby union from the 2010–2011 season and the UEFA’s financial fair play regulations). No formal decisions have been taken so far by the European Commission and the French competition authority on the compliance of salary cap regulations or other similar regulation tools with competition rules. Given this context, the decisions of the New Zealand’s competition authority (“Commerce Commission”) dealt with in this article are interesting as they relate to the salary cap put in place as from 2006 by the New Zealand Rugby Football Union in the domestic inter-provincial rugby competition. More particularly, the Commerce Commission’s first decision, dated 2 June 2006, is highly interesting as the Commerce Commission carried out an in-depth legal and economic analysis to authorise the entry into effect of the salary cap pursuant to competition rules applicable in New Zealand. While these decisions should be analysed under the specific sporting and legal background of New Zealand, it is interesting to investigate what could be their practical and legal impact in Europe.

'Financial Fair Play' or 'Oligopoleague' of Football Clubs?: A Preliminary Review Under European Union Competition

This short paper offers a first analysis of the UEFA's "break even requirement" under the EU competition rules. It shows that there are good reasons to believe that the UEFA Financial Fair Play regulation violates Article 101 of the Treaty on the Functioning of the EU, in particular because it limits investments in the sense of Article 101(1) b) TFEU and in turn risks ossifying the market structure to the benefit of a tight oligopoly of football clubs.

Revenues from related Parties Transactions and UEFA Financial Fair Play. The Search for an Alternative Solution to Fair Value Measurement for the Break-even Result Assessment

Transactions with related parties (RPTs) are numerous and frequent in the economy of companies; they are often made with different values from the ones in arm’s length transactions, and sometimes for opportunistic reasons. Many cases of RPTs occur in the football sector too, and they are mostly related to sponsorship contracts revenues. Through the financial fair play regulations, UEFA encourages the clubs which want to get the license for competing in European tournaments, to count on their capability to operate on the basis of their own revenues. The reorientation of the professional football clubs economic governance requested by UEFA also provides specific RPTs disclosure as well as their fair value measurement, suggesting downward adjustments for RPT revenues, and upward adjustments for RPT costs, recorded at different value. However, the procedures and activities underlying the fair value measurement expose to some difficulties - among which the need for specific individual decision on each case, with the consequent high risk of treating similar cases differently - and are likely to undermine the effectiveness of the financial fair play rules. This contribution suggests an alternative hypothesis with respect to fair value measurement of RPTs for the UEFA FFP.

Football club financial reporting: time for a new model?

Purpose– The purpose of this paper is to critically evaluate football club financial reporting with reference to: the long-standing debate on the nature and purpose of accounting; and the implementation of UEFA's Financial Fair Play (FFP) regulations.Design/methodology/approach– The paper is based on a review and analysis of academic literature, accounting regulation and football regulations.Findings– The focus of financial reporting on rational economic decision-makers results in football club financial reports being of limited use to many football club stakeholders. Consideration of the social and organisational context of football, as takes place in FFP, can be used as a catalyst to consider broader approaches to football club reporting. The paper calls for fuller and different pictures to be provided of clubs’ performance, in particular broadening the scope of accountability to users beyond that provided by an economic account.Research limitations/implications– The paper is designed to stimulate debate about accounting for and reporting on football club businesses. A necessary next step is an exploratory project, focusing on one or a small number of clubs and their stakeholders, exploring in a practical setting what enhanced football club reporting might look like.Originality/value– While the weaknesses of financial reporting have been considered extensively in the mainstream accounting literature and on occasion in terms of sport, the paper seeks to progress this discussion by linking it to significant football policy initiatives and to wider social and community-based football research.

Financial Fair Play in European Club Football - What is it All About?

The new UEFA Club Licensing and Financial Fair Play Regulations have encountered stiff criticism. The concerns are that the new regulations may harm football in three different ways: By forgoing the potential benefits from substantial injections of “external” money into payrolls, by restricting competition in the player market without at the same time achieving benefits from more balanced competition, and by creating some sort of barrier to entry which could “freeze” the current hierarchy of clubs. It is the purpose of this paper to take these concerns as a starting point for discussing the likely effects of the new regulations. As a by-product it will become obvious why and in which points the concerns are unfounded.

The Effects of the UEFA Financial Fair Play Regulation on Earnings Management in the European Football Industry

The purpose of this study is to examine various factors effecting earnings management behavior in the European football industry from 2006 to 2012. Empirical studies have documented the association between football clubs’ financial difficulties and player salaries, but none have empirically examined the association between player salaries and club’s earnings management behavior. In response to the increased financial instability of football clubs in Europe, the passage of the UEFA Financial Fair Play regulation in 2009 was intended to increase financial discipline and responsibility amongst football clubs. However, the findings from this study document that clubs with higher payrolls and those actively attempting to be in compliance with the Financial Fair Play regulation engage in more opportunistic earnings management behavior, thereby reducing the reliability of the club’s published financial statements. Additionally, this study examines the role corporate governance and audit quality plays in mitigating these aggressive earnings management behaviors, and finds, consistent with prior literature, stronger corporate governance and audit quality characteristics are negatively associated with forms of earnings management. Overall, the findings from this study reveal the possible adverse effects stemming from newly enacted financial regulations, and document the importance of sound fiscal policies to protect the interests of various shareholders and stakeholders.

A tricky European fixture: an assessment of UEFA’s Financial Fair Play regulations and their compatibility with EU law

UEFA have recently implemented ‘Financial Fair Play’ regulations that govern the spending of European football clubs. This article examines the content of those regulations, with particular attention paid to the contentious ‘break-even’ requirement. Also considered is the European regulatory framework and the potential legal challenges this might present to UEFA, particularly in respect of the possibility that the regulations may inhibit the free movement of workers; whether Financial Fair Play constitutes an anti-competitive agreement; and if so, whether this is mitigated by doctrine of the specificity of sport. Crucial to the legality of the regulations is the prevailing financial climate of European football and this is also discussed, with the questions Financial Fair Play engenders presented and considered, and conclusions drawn as to Financial Fair Play’s enforceability in light of this.

Competitiveness of the English Premier League (1992-2010) and ten European football leagues (2010)

This paper examines the state of competitiveness in top division football leagues in ten European countries. Potential factors that might affect, or be influenced by, competitive balance are also explored. Using alternative indicators of competitive balance, the research found that with the passage of time the English Premier League has become less competitive, which coincides with the growing incidence of overseas investment in English clubs. The French Ligue 1 emerged as the most competitive league (out of ten) in Europe on most indicators in 2010, whereas the Dutch Eredivise was the least balanced. Further investigation revealed a strong statistically significant relationship between league competitiveness and league size (number of clubs) and a moderately strong, albeit insignificant, effect of a league’s competitive balance on its popularity (attendance). However, the link between competitiveness and the perceived quality of countries’ football leagues (as per UEFA association rankings) was relatively modest and insignificant. The findings provide a useful baseline for examining the effect of UEFA’s financial fair play regulations on the competitiveness of football leagues across key European markets in the years to come.

Financial Conditions and Transparency of the Czech Professional Football Clubs

The UEFA approved the Club Licensing and Financial Fair Play Regulation in 2010, which governs the requirements on transparency and financial conditions of football clubs participating at the European cups. The paper focuses on the specifics of Czech professional football clubs. The research is carried out in two ways. Firstly, the compliance with information duties set up by Czech commercial law is analysed. According to the performed empirical survey, a significant number of Czech football clubs submit their financial statements to the Business Register with a delay or they do not submit the statements at all despite the submission is mandatory. This unsatisfactory state of affairs boosts the risk of bankruptcy of football clubs rapidly taking into account an overall poor financial health of Czech football clubs, which is evidenced by the second part of empirical study.

The Structure of Corporate Ownership: Causes and Consequences

This paper argues that the structure of corporate ownership varies systematically in ways that are consistent with value maximization. Among the variables that are empirically significant in explaining the variation in ownership structure for 511 U.S. corporations are firm size, instability of profit rate, whether or not the firm is a regulated utility or financial institution, and whether or not the firm is in the mass media or sports industry. Doubt is cast on the Berle-Means thesis, as no significant relationship is found between ownership concentration and accounting profit rates for this set of firms.

Toward a More General Theory of Regulation

Toward a More General Theory of Regulation

The Baseball Players' Labor Market

The Baseball Players' Labor Market