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Has financial fair play changed European football?

Author

Listed:
  • Caglio, Ariela
  • Laffitte, Sebastien
  • Masciandaro, Donato
  • Ottaviano, Gianmarco Ireo Paolo

Abstract

In 2011 UEFA, the governing body of European football, introduced the Financial Fair Play Regulation (FFPR), consisting of a set of financial restraints to be met by clubs as a prerequisite for participation to its competitions. The aim of the FFPR was to introduce financial discipline into the clubs' decision-making processes, and ultimately protect the long-term viability of the European football industry. The reform was criticized because of possible unintended detrimental consequences. In particular, Peeters and Szymanski 2014 provided a model-based ex-ante simulation analysis showing that the reform would increase the profitability of clubs, but also tilt the competitive balance in favor of the top teams, thus reducing the interest of fans and investors as one of the main attractions in sports is precisely that the best team does not always win. Exploiting an original dataset between the seasons 2007-2008 and 2019-2020, we provide an ex-post econometric evaluation of the effects of the introduction of the FFPR revealing causal evidence that largely vindicates those ex-ante predictions.

Suggested Citation

  • Caglio, Ariela & Laffitte, Sebastien & Masciandaro, Donato & Ottaviano, Gianmarco Ireo Paolo, 2023. "Has financial fair play changed European football?," LSE Research Online Documents on Economics 121307, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121307
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    File URL: http://eprints.lse.ac.uk/121307/
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    References listed on IDEAS

    as
    1. Egon Franck, 2010. "Private Firm, Public Corporation or Member’s Association Governance Structures in European Football," International Journal of Sport Finance, Fitness Information Technology, vol. 5(2), pages 108-127, May.
    2. Simon Freyaldenhoven & Christian Hansen & Jorge Perez Perez & Jesse Shapiro, 2021. "Visualization, Identification, and stimation in the Linear Panel Event-Study Design," Working Papers 21-44, Federal Reserve Bank of Philadelphia.
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    6. Brantly Callaway & Andrew Goodman-Bacon & Pedro H. C. Sant'Anna, 2021. "Difference-in-Differences with a Continuous Treatment," Papers 2107.02637, arXiv.org, revised Jan 2024.
    7. Thomas Peeters & Stefan Szymanski, 2014. "Financial fair play in European football [v. National Football League, 560 (The Supreme Court May 24, 2010)]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 29(78), pages 343-390.
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    10. Baxter, Jane & Carlsson-Wall, Martin & Chua, Wai Fong & Kraus, Kalle, 2019. "Accounting and passionate interests: The case of a Swedish football club," Accounting, Organizations and Society, Elsevier, vol. 74(C), pages 21-40.
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    Cited by:

    1. Budzinski, Oliver, 2024. "Financial regulation in sport championships as an anticompetitive institution," Ilmenau Economics Discussion Papers 187, Ilmenau University of Technology, Institute of Economics.

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    More about this item

    Keywords

    accounting measurement; financial fair play (FFP); financial sustainability; team's quality; competitive balance;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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