UEFA Financial Fair Play Research Articles

New Financial Fair Play Requirements in the Context of Global Restrictions

The purpose of the paper is to develop recommendations for Russian football clubs aimed at strengthening their financial stability.The subject of the study is the UEFA financial fair play rules and their impact on the financial stability of football clubs.The relevance of the paper is confirmed by the changes taking place in financial regulation of football clubs by the UEFA and the Football Union of Russia (FUR), which are caused by the global crisis and have not yet been studied in the scientific literature, which confirms the novelty of the study. The authors’ method is an analysis of the editions of the UEFA financial fair play rules and RFC licensing rules that have been in effect since 2011, along with any violations and subsequent sanctions. The annual reports of European public football clubs, studies of consulting companies, and academic publications in this field were also considered. This paper helped identify the chronology of financial rules in football and directions for their improvement. The authors conducted a detailed analysis of financial performance of club football in Europe and Russia, taking into account the impact of the pandemic, revealed the main problems and ways to solve them based on best practices.The results of the research included recommendations for conforming to the financial requirements of international federations and FUR as well as ensuring the long-term sustainability of the Russian football industry.

The Fairness Competition Under UEFA Financial Fair Play

Financial Fair Play (FFP) is a regulation made by UEFA so that club finances remain sustainable and stable. Current conditions show that the implementation of FFP is still considered sub-optimal because the dominance of the club that won the league still exists. This study aims to determine the effectiveness of Financial Fair Play regulations by looking at Financial Performance, Capital Structure, and Transfer Player Expenses on Competitive Balance under the Union Europe Football Association. By using theoretical review of several articles related to research produce a hypothesis that the relationship between Financial Performance, Capital Structure, and Transfer Player Expenses variables has a positive relationship to Competitive Balance during the implementation of Financial Fair Play regulations in Europe.

‘You can look, but don’t touch’: competitive balance and dominance in the UEFA Champions League

ABSTRACT This paper examines the competitive balance of the Champions League between 1992/93–2019/20 focusing on both the group and knockout stages. The findings show that competitive balance has declined in the Champions League over time and that the competition has begun to be dominated by a select number of clubs. This situation has also worsened in the years following the inception of UEFA Financial Fair Play regulations in 2011. From a sporting economics perspective, the received theory suggests that such a decline in competitive balance could harm the product. If competitive balance continues to decline, the Champions League may face potential future challenges from the attractiveness of the product to broadcasters and commercial partners as well as the continuing emergence of financially dominant super clubs. This could also exacerbate the threat of breakaway European super leagues that would further damage the competition through the potential loss of elite teams within it.

Integrity principle of sports competition: seeking certainty

The fall of 2021 in European football was marked by a pause in the Super League case: the Union of European Football Associations stopped disciplinary proceedings against the three clubs remaining in the status of organizers, and also canceled all mandatory payments to the confederation from the clubs that left the project. In a previous article, we looked at the UEFA Statutes and the UEFA Licensing and Financial Fair Play Regulations as possible sources of regulation that would have been violated by the emergence of new competition. However, the existence of UEFA regulation preventing the proliferation of organizers of football events on a European scale met with a possible obstacle from the economic-competitive guarantees provided in the provisions of the Treaty on the Functioning of the European Union. At the moment, UEFA is preparing to consider the dispute in the instances of European justice. One of the key arguments on the part of UEFA may be the violation by the Super League organizing clubs of the principle of the integrity of the competition (the integrity of sports). This will additionally update the meaning of the principle for sports justice. However, UEFAs chances of a successful application of the principle seem low: this principle is too elastic and subjective, although it has been featured in the normative regulation of sports for a long time. In the present study, the author has analyzed all the disputes before the Court of Arbitration for Sport (CAS) in which the principle of the integrity of sporting events was declared. The conclusions made confirm the complexity of a convincing appeal to the principle of any sports subject.

The effectiveness of UEFA Financial Fair Play: evidence from England and France, 2008–2018

PurposeThis paper analyses the effectiveness of UEFA's Financial Fair Play (FFP) under the break-even requirement.Design/methodology/approachData was collected from English and French football clubs competing in the English Premier League (EPL) and in Ligue 1 (L1) for the financial years 2008–2018. Our sample includes 395 club-year observations. Relevant statistical tests have been conducted with the aim of analysing the effects of pre (2008–2012) and post (2012–2018) FFP enforcement under both profitability and cost-efficiency assumptions.FindingsIn the EPL, an increase is observed in clubs' profitability through both operating and break-even results. In L1, this improvement is only significant for break-even results of clubs not participating regularly in European competitions (non Euro-oriented clubs). Player expenditures, measured through two wage-to-revenue ratios excluding trading activity for one and including it for the other, have significantly decreased in the EPL except for the Euro-oriented clubs for this latter. Conversely, in L1, this decrease is only significant in both wage-to-revenue ratios for non Euro-oriented clubs and for the whole sample when trading is included.Practical implicationsIn addition to evidencing contrasting results in FFP effectiveness across countries, our results suggest it is not the sole cause of such an improvement in clubs' finances. We suggest that UEFA should pursue its efforts to scrutinise the level of clubs' player expenditures and that there is a need for a wider look at the FFP regulations.Originality/valueThis article provides further contribution to empirical studies on FFP effectiveness that have often been focused on a single country.

The game behind the game: UEFA's Financial Fair Play Regulations and the need to field a substitute

ABSTRACT European soccer clubs tend to spend beyond their revenues, causing disruptions in their finances. To minimize these disruptions, UEFA enacted the Financial Fair Play Regulations (FFP). FFP achieves its objectives through the “break-even” requirement, which prohibits clubs from spending beyond their revenues. This article argues that FFP violates Articles 101 and 102 TFEU. While there has been scholarly interest in FFP’s incompatibility with competition law, the focus has been on Article 101. In addition to contributing to the scholarship on FFP’s violation of Article 101, this article presents arguments on how FFP violates Article 102. This article then explores UEFA’s interactions with European regulators as a backdrop for explaining why regulators have failed to address FFP’s violation of Articles 101 and 102. This article concludes by arguing that a change to FFP is imminent and suggests a novel method through which UEFA can maintain FFP’s objectives while complying with competition law.

Does Compliance with Financial Fair Play Rules Improve the Football Clubs' Sport Performance and Their Chances to Reach UEFA Competitions?

This paper evaluates the European football clubs' compliance with UEFA Financial Fair Play (FFP) regulations and the effect of financial stability on sport achievements. The empirical analysis uses data of teams competing in the 1st division of four top domestic leagues (Premier League, La Liga, Serie A, and Ligue 1) over the seasons 2009/10 to 2015/16. We control for team quality through the annual wages (in quadratic form) and use the Wage-to-Revenue (WRR) ratio as a proxy variable to measure how close the clubs meet the break-even requirements. Our results reveal that greater financial responsibility implies better sport performance and higher chances to qualify for the Champions and Europa Leagues.

Applying UEFA Financial Fair Play Rules and Improving the Financial Stability of Football Clubs Illustrated by the Example of Manchester City FC

This article considers the financial monitoring of football clubs under UEFA Financial Fair Play (FFP) regulations. The aim of the paper is to study the current system for assessing the financial stability of football clubs and propose measures for its practical application. The work is relevant due to a wide range of financial challenges in modern football and supported by a detailed analysis of a recent case of Manchester City football club accused of breaching FFP. Studying the main allegations against the club, the author analyzed the basic concepts of FFP, breaches of other clubs and sanctions imposed on them, with emphasis on the experience of Russian clubs. The analysis illustrated the role of UEFA and football clubs with regards to FFP implementation, considering a specific case. The author estimated the potential Losses of Manchester City due to the Champions League ban, and, in addition, the total losses due to the English Premier League suspension amid coronavirus threat. Using FFP criteria, the author analyzed the financial stability of Manchester City and Russian football club CSKA Moscow and identified similar problems for the clubs. The author outlined recommendations for UEFA rules compliance and presented a system of indicators that help to regularly monitor and manage the longterm financial stability of football clubs. The findings of the paper may find application in the field of other team sports.

How the UEFA Financial Fair Play regulations affect football clubs’ priorities and leagues’ competitive balance?

Institutional and legal reforms applied in the context of sports competitions often provoke structural changes that can be empirically investigated. Using a data set of 560 observations (20 teams per season, from 2009/10 to 2015/16, of teams playing in the Premier League, La Liga, Serie A and Ligue 1), this paper examines how the UEFA Financial Fair Play (FFP) regulations may have altered the football clubs’ decisions concerning their sport and financial priorities. Moreover, based on a simple theoretical description, the paper shows that the increasing financial stability promoted by the FFP rules might actually imply – as an undesired side effect – a declined competitive balance affecting the European football leagues. Finally, the paper discusses some policy issues and recommendations.

Financial Reporting in European Football Teams: A Disclosure Analysis of Player Registrations

This paper critically analyses disclosure reporting and transparent valuation of the impairment test application (IAS 36) on intangible assets (IAS 38) in football clubs that prepare financial statements in accordance with IAS/IFRS and UEFA Financial Fair Play Regulations. Following a three-step procedure, the paper examines the financial statements of all the companies listed on the STOXX Europe Football Index for a five-year period (2012-2016). The research reveals some interesting and some controversial findings. Several football clubs exhibit a low level of disclosure and others a high one. Therefore, this study focuses on specific areas that primarily relate to economic and financial communication, as financial statements need to provide contextual disclosure. The study pioneers constructive criticism in relation to financial documentation and reporting produced by football companies. IAS/IFRS require further development in order to adapt typologies of specific sustainable business models for all the companies in the football industry.

Developing a Sustainable Business Environment in Sports- UEFA Financial Fair Play

The competitive football system in Europe has created a platform for businesses all around the world either ready to buy football clubs or sponsor them. However, this particularly attractive environment makes football clubs want to compete at the limit of their financial resources. In order to prevent long term negative effects of this arms race, UEFA has implemented the Financial Fair Play Regulations (FFP). The purpose of this article is to find the causes that led to the need of controversially regulating the free market in sports. It also helps provide clarity regarding the future of these regulations.

The impact of UEFA financial fair play on player expenditures, sporting success and financial performance: evidence from the Italian top league

ABSTRACT Research question: In this study we empirically test the following hypotheses regarding the impact of financial fair play (FFP) on Italian first-division clubs: 1) FFP works as a governance mechanism moderating the relation between internal governance mechanisms and wage expenditures, 2) FFP is altering the relative importance of player expenditures as drivers of sporting performance, and 3) FFP is shifting the business model of Italian clubs leading to a more efficient decision-making on player transfers. Research methods: Using 165 club-year observations from 2007 to 2017, we jointly model the determinants of wage expenditures, sporting results and financial performance via a simultaneous equation approach. The impact of FFP is estimated by interacting a dummy variable for FFP with the key explanatory variables of each model. Results and findings: Empirical results show that FFP has 1) a negative effect on the relation between wages and sporting results, 2) a positive effect on the relation between net transfer fees and sporting results, and 3) a positive effect on the relation between gains on player trading and financial performance. Implications: Overall results suggest that FFP is altering the business model of Italian clubs from an investment-focused (wage spending) to a more efficiency-driven one that is geared to make gains from player trading. Accordingly, club managers should commit to creating sustainable cycles of player transfers in order to thrive under the new regulatory environment. As for regulators, this study supports the notion that FFP restores efficient managerial incentives in football businesses, reinforcing the case for a full implementation of the regulation.

A combined methodology for the concurrent evaluation of the business, financial and sports performance of football clubs: the case of France

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.

French DNCG management control versus UEFA Financial Fair Play: a divergent conception of financial regulation objectives

The French Football Federation was the first football governing body to put in place, in 1990, a financial regulation system. It might be expected that UEFA’s Financial Fair Play (FFP) system established in 2010 would be similar to French DNCG (National Direction for Management Control) regulations. However, while FFP is concerned with profitability, DNCG is focused on solvency. Hence, a French club may be loss-making and not compliant with FFP, while at the same time being solvent in accordance with DNCG rules. Our research confirms that most French clubs do not conform to FFP rules. As such, it provides further evidence that DNCG has not prevented poor financial management within French clubs. The coexistence of DNCG and FFP– or any other domestic financial regulation and FFP –may result in disparities between domestic clubs. As a consequence, there should be consistent financial regulation in all European leagues.

RECOGNITION OF FOOTBALL PLAYERS CONTRACTS BY MEANS OF THE ACTIVE MARKET

The paper provides a theoretical analysis based on the idea that the active market is the main determinant of human capital recognition in the financial statements within football industry. The study represents a general review of the authors concerning the situation of players' contracts registration which may influence the management decision processes of companies operating inside and outside of the football arena. The paper can help the managers of firms operating in other industries than football to discover insights about the possibilities of recognition of human capital rights in the financial statements. We have used the archive method for documents such as UEFA Club Licensing and Financial Fair Play Regulations and Regulations on the Status and Transfer of Players. The paper contributes to the literature by analysing the situation of football players' rights being recorded in the financial statements in order to inform future research in the field.

The guardians of European football: UEFA Financial Fair Play and the career of social problems

UEFA’s Financial Fair Play (FFP) policy represents a severe regulatory intervention in European club football competitions. While potential outcomes of the concept have been thoroughly assessed, there is little research on the genesis and background behind its implementation. The present paper fills this gap by analyzing the discourse in the run-up to the passage of FFP. We focus on interpreted practice and context and argue that the rising indebtedness of clubs and their increasing reliance on benefactors were a necessary but not sufficient requirement. Further ingredients imperative for the successful policy development were claims-making activities by influential actors to secure support for their problem perception. Strong discourse coalitions were formed around powerful storylines, such as the interpretation of making debts as ‘cheating’ as well as the notion of traditional sporting values being undermined by financial forces. By detecting such mechanisms of interaction, the study helps to better understand the beliefs and ideologies underpinning the policy. It furthermore identifies discrepancies between public discourse and scholarly debate concerning the problem assessment as well as the proposed solutions and their effectiveness. Additionally, it proposes an improved heuristic for understanding discursive practices which contributes to future investigations of social problems in sport.

The UEFA Financial Fair Play Rules: a difficult balancing act

The aim of this article is to set out the rationale for the new UEFA Financial Fair Play Rules (FFPRs), examine what the provisions state and offer a conclusion about their significance. The article will illustrate that there are a number of criteria and exceptions which clubs can use to their advantage. There will also be an explanation regarding the amortisation of transfer fees and how such accounting practices will affect clubs wishing to break-even in order to qualify for UEFA club competitions.

Wladimir Andreff (Ed.), Disequilibrium Sports Economics: Competitive Imbalance and Budget Constraints

Abstract. The economics of professional team sport leagues has been built on three main pillars in the US literature: economic equilibrium for the product market and labour market for talent; profit maximisation; and competitive balance between teams (sporting equilibrium). The European literature has brought a fourth pillar: win maximisation with a hard budget constraint (break-even accounting rule). These four pillars have remained little questioned until recently. This emerging literature is one of the motivations for launching a book dealing with disequilibrium. Another is the editor’s conviction that the reality in team sport leagues does not fit with general equilibrium solutions. The first chapter introduces the previous elements and more generally the book while the seven following chapters develop a specific aspect related to disequilibrium: an attempt at modelling; a dynamic non-equilibrium simulation; the metrics of competitive imbalance; gender imbalance on the sports programme market; and the last three chapters on soft budget constraints with three different focuses (comparison between European and US leagues; governance and agency problem; regulation regarding the new UEFA club licensing and Financial Fair Play). As a whole, the book provides an original and realistic view that can and perhaps even must shape the future of sports economics. Keywords. Disequilibrium Sports Economics; Competitive Imbalance; Budget Constraints. JEL. Z20, L83, D50, L50, P20.

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 Financial Impact of (Foreign) Private Investors on Team Investments and Profits in Professional Football: Empirical Evidence from the Premier League

US owners at Manchester United, Arsenal London, and Liverpool; Arab owners at Manchester City; Russian owners at Chelsea London – the top football clubs from England have been acquired by private (mostly foreign) majority investors. Some of these clubs have been claimed to distort national competition, and Manchester City had to pay €60m as a punishment for violating UEFA Financial Fair Play rules in 2014. Thus, this article addresses the controversial financial impact of (foreign) private majority investors in the overinvestment environment of European professional football. Applying property rights theory to an unbalanced panel from the first English division from 2005/06 to 2011/12, this paper tests theoretical predictions from the ‘sugar daddy’ literature and empirically shows that, first, private investors increase team investment and decrease profits. And, second, the positive influence on team investment can mainly be reduced to foreign investors. Implications for utility- and profit-maximizing team owners, managers, and regulators are derived.