UEFA Financial Fair Play Research Articles

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.

Football and State aid: too important to fail?

High-profile investigations into Dutch and Spanish football have brought the application of EU State aid law in sport into sharp focus, highlighting serious and potentially widespread legal failings throughout professional football in Europe. The EU recognises professional football as economically, socially and culturally vital; thus, in the highly politicised arena of State aid, enforcement is far from straightforward. This overlooked tension between EU law and sport provides a new and interesting angle from which to view the EU’s policy on sport, and the relationships between global actors, the Commission, UEFA, Member States and professional football clubs. The area also makes visible a dynamic interaction of interests, engaging the EU internal market, the societal role of sport, UEFA financial fair play and Member State autonomy. The operation of State aid law in football looks set to revolutionise funding in sport generally, presenting an exciting opportunity for EU sports policy, and also putting impetus behind continued State aid modernisation.

'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.

Analysis of The Implementation of UEFA Financial Fair Play: A Case Study on Arsenal and Machester United Football Club

This study aims to analyze the implementation of UEFA Financial Fair Play (FFP) to European football clubs. Research is conducted based on Arsenal and Manchester United football clubs financial statements for 2010-2012. The study uses financial simulation to test whether the two England-based club are able to meet the UEFA FFP rules. Analyses were also conducted on the financial performance ratios of both clubs and their effects on the implementation of the UEFA FFP. The result is the two clubs can meet the standard provisions for the implementation of UEFA FFP. In the assessment of financial performance, Arsenal have a slightly better financial ratios than Manchester United. Performance aspects of profitability and solvency became an issue in the implementation of UEFA's FFP, related with debt holdings and high salaries that owned by both clubs.

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.

The relationship between ownership structure and club performance in the English Premier League

PurposeThe purpose of this paper is three‐fold. First, to explore the relationship between the financial and sporting performance of clubs competing in the English Premier League (EPL). Second, to investigate the effect of different models of EPL club ownership on financial and league performance. Third, to review the finances of EPL clubs in the context of UEFA's Financial Fair Play regulations.Design/methodology/approachFinancial data from annual reports for the period 2001‐2010 was collected for 20 EPL clubs. Correlation analysis was conducted to examine the relationship between the finances of EPL clubs and their league position. One‐way analysis of variance (ANOVA) tests were then used to examine the effect of ownership type on clubs’ financial and league performances. Where the results of ANOVA testing revealed statistically significant differences between groups, these were investigated further using appropriate post hoc procedures.FindingsThe stock market model of ownership returned better financial health relative to privately owned (domestic and foreign) clubs. However, clubs owned privately by foreign investors or on the stock market performed better in the league in comparison with domestically owned clubs. The stock market model was more likely to comply with Financial Fair Play regulations.Originality/valueThe paper confirms empirically that football clubs that float on the stock market are in better financial health and that clubs in pursuit of short‐term sporting excellence are reliant on substantial investment, in this case from foreign investors.

The need for regulating professional soccer in Europe

PurposeThe purpose of this paper is to argue for the necessity of regulating European club football financially, in order to create a fair structure of sporting competition.Design/methodology/approachBy deploying the soft budget constraint approach – originally developed by Hungarian Economist János Kornai in order to understand (public) business behavior in socialist and post‐socialist economies – and combining it with empirical analysis, the paper develops an understanding of why the majority of European top league clubs are loss‐makers and why regulation is needed. The paper rests on its application of the soft budget constraint approach to build its argument and uses existing empirical research in order to support it within the field of European professional football.FindingsThe paper finds substantial evidence of soft budget constraints in professional football clubs, and argues that softness punishes the few financially well‐managed clubs in sporting terms for balancing their books.Research limitations/implicationsFrom a theoretical point of view, the new perspective of soft budget constraints takes political, cultural and emotional aspects into account in order to understand economic behavior among professional team sports clubs. This gives promising new insights into the discipline of sports economics and sports management.Practical implicationsThe paper's findings demand action to be taken to secure financial fair play in order to deal with issues of equal sporting competition. It argues that this must be done through a central regulation scheme covering all European leagues, thus endorsing the new UEFA financial fair play program. At the same time, however, the paper recognizes the problems in implementing the program efficiently.Originality/valueThe originality and value of the paper is its application of a new theoretical approach that clarifies the problems of European professional football and the reasons why regulatory solutions are necessary to harden the budget constraints.

The Baseball Players' Labor Market

The Baseball Players' Labor Market