Interactions between financial efficiency and sports performance. Data for a sustainable entrepreneurial approach of European professional football clubs
| Pages | 84-102 |
| Date | 11 March 2019 |
| Published date | 11 March 2019 |
| DOI | https://doi.org/10.1108/JEPP-D-18-00060 |
| Author | Dina Miragaia,João Ferreira,Alexandre Carvalho,Vanessa Ratten |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Interactions between financial
efficiency and sports performance
Data for a sustainable entrepreneurial
approach of European professional
football clubs
Dina Miragaia
Department of Sports Science, University of Beira Interior, Covilhã, Portugal
João Ferreira and Alexandre Carvalho
University of Beira Interior, Covilhã, Portugal, and
Vanessa Ratten
La Trobe University, Bundoora, Australia
Abstract
Purpose –In the current economic climate, the huge rise in the levels of debt incurred by professional
football clubs challenges the need to improve their efficiency levels. Hence, analysis of their productivity is
essential and represents an integral dimension to any realistic and efficient strategy. Any such strategy
includes the identification and analysis of the inputs and outputs that underpin club sustainability. The
purpose of this paper is to evaluate the relationship between the team performance of professional European
football clubs and the stability of their financial efficiency.
Design/methodology/approach –The sample spans 15 professional football clubs that won the league
titles in the leading football leagues (the English, German, Spanish, Italian and French leagues) in the period
between 2009 and 2014. The analysis made recourse to the data envelopment analysis method.
Findings –The results demonstrate that of the 15 clubs analysed, only 10 proved efficient. Football is now
an industry that moves major quantities of financial capital and holds the attentions of large groups of fans
worldwide. However, despite this attractiveness, the financial crisis and recession, ongoing since 2008,
increasingly requires the better management of such resources. To this end, clubs should improve their
control over the financial resources available given the positive relationship prevailing between the sporting
performance of clubs and their levels of financial efficiency.
Originality/value –Analysis of the efficiency levels of the inputs and outputs encapsulating performance
related financial variables may aid in improving the standards of planning and sustainable management at
professional sport clubs.
Keywords Efficiency, Sport policy, Performance, Football, Sport entrepreneurship
Paper type Research paper
Introduction
Football is the world’s most popular sport and wealthiest in terms of club revenue and
player expenditure (Zhang et al., 2018; Ratten and Ferreira, 2017; McDonagh, 2017). Despite
the significance of football in the global economy there is still a concern about the financial
management of clubs and resulting impact on communities. This is an area of importance
for sport policy analysts and researchers who want to understand how the way sport can
incorporate social, economic and environmental concerns ( Miragaia et al., 2017a).
Professional sports clubs are a complex unit of analysis. First of all, it is important to
distinguish the goals of a non-profit football club, more directed to encourage the practice of
sport, compared to professional football clubs that become real business. Professional
Journal of Entrepreneurship and
Public Policy
Vol. 8 No. 1, 2019
pp. 84-102
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-D-18-00060
Received 26 October 2018
Revised 18 January 2019
Accepted 18 January 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
The authors would like to thank to NECE –Research Unit in Business Sciences funded by the
Multiannual Funding Programme of R&D Centres of FCT –Fundação para a Ciência e a Tecnologia,
under the project “UID/GES/04630/2013”.
84
JEPP
8,1
football clubs can be seen in these two approaches. We have the emblematic and emotional
side of sport, with a great fan involvement. On the other hand, we have the shareholders,
sponsors, to look at this phenomenon as a business where they invest their capital and of
which they want financial return.
Football accounts for an industry able to move large quantities of financial capital and
attaining a level of turnover that stood in the region of €17bn in just one single season
(Plumley et al., 2017; Ribeiro and Lima, 2012), representing one of the largest components of
the global entertainment industry. However, despite these impressive levels of turnover,
some clubs have put major investments into their teams and resulting in some engaging in
effectively ruinous management practices through reporting debts amounting to thousands
of millions of euros annually and facing a serious risk of bankruptcy (Drut and Raballand,
2012; Nagy, 2012). Kern and Sussmuth (2005) state that the top clubs annually overspend by
around €50m on these investments. Clubs such as Barcelona (€230m); Borussia Dortmund,
Lazio, Inter Milan (€281m); or AS Roma (€224m) report extremely high accumulated debt
levels (Andreff, 2007). Such facts show that only some clubs are positioned to effectively
respond to ongoing economic changes and comply with the requirements necessary to
competing in professional terms (Nagy, 2012). Hamil et al. (2010) state that in the case of the
top 20 Italian football clubs, the total accumulated debt stands in excess of €4.2bn. García
and Rodríguez (2003) also maintain that Spanish clubs report precarious financial positions,
with a collective level of debt in the region of €1.6bn. These debt levels in turn closely
interrelate with the specific financial regulations in effect in each country with the
restrictions prevailing in France and Germany far more severe than those in Spain, Italy and
England (Drut and Raballand, 2012).
Nevertheless, the financial problems of clubs derive from a series of factors. Andreff
(2007) highlights how the main cause of the financial difficulties faced by French clubs
arises from the inappropriate management of such resources driving a deficit in the
current account and impacting on the budgets implemented down over the years. Despite
this dimension, the actual consequences are minimised through private investment
continuing to flow into the clubs. Another factor interrelates with how any incoming
revenues are immediately applied to raise club expenditure levels (Ascari and Gagnepain,
2006). Both Hamil and Walters (2010) and also Hassan and Hamil (2010) demonstrate this
facet and confirm that between 1992 and 2007, the income generated by Premier League
clubs rose by 900 per cent even while an overall majority of clubs generally still
encountered difficulties in meeting their financial obligations and resulting bankruptcies
over the period from 1992 to 2009.
Frick and Prinz (2006)point to the sharp rise in debt levels taken on by such institutions
and providing German clubs as their example by identifying a 100 per cent rise in total
German football club debt in the period between 1999 and 2004. Frick (2011) explains the
main cause driving this rise in debt as stemming from the rise in salary costs and advancing
faster than the increases in the turnover of football clubs, and in some leagues, over
60 per cent of club income goes on the payments of salaries and remunerations. Ribeiro and
Lima (2012), based on Portuguese football club data, also affirm that clubs invest excessive
amounts in football player wages and to an extent that does not reflect the efficient
application of the available human resources.
The aim of this study is to analyse whether the performance of a professional football
club correlates with their financial efficiency. This is an important area of sport policy as
there is growing awareness of the ramifications financial irregularities can have on sport
clubs and their stakeholders (Miragaia et al., 2016; Miragaia et al., 2017b). This paper is
structured as follows. First, the literature on financial efficiency in football is discussed and
the impact of the Union of European Football Associations (UEFA) financial fair play policy
stated. Next, the methodology in terms of analysing the 15 professional European football
85
European
professional
football clubs
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