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Has financial fair play changed European football?

Author

Listed:
  • Ariela Caglio
  • Sebastien Laffitte
  • Donato Masciandaro
  • Gianmarco I. P. Ottaviano

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

  • Ariela Caglio & Sebastien Laffitte & Donato Masciandaro & Gianmarco I. P. Ottaviano, 2023. "Has financial fair play changed European football?," CEP Discussion Papers dp1952, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1952
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    References listed on IDEAS

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    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. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    3. Orley Ashenfelter & Daniel Hosken, 2010. "The Effect of Mergers on Consumer Prices: Evidence from Five Mergers on the Enforcement Margin," Journal of Law and Economics, University of Chicago Press, vol. 53(3), pages 417-466.
    4. 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.
    5. Christine Cooper & Joanne Johnston, 2012. "Vulgate accountability: insights from the field of football," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 25(4), pages 602-634, May.
    6. Simon Freyaldenhoven & Christian Hansen & Jorge Pérez Pérez & Jesse M. Shapiro, 2021. "Visualization, Identification, and Estimation in the Linear Panel Event-Study Design," NBER Working Papers 29170, National Bureau of Economic Research, Inc.
    7. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2013. "The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 239-261, February.
    8. Markus Sass, 2016. "Glory Hunters, Sugar Daddies, and Long-Term Competitive Balance Under UEFA Financial Fair Play," Journal of Sports Economics, , vol. 17(2), pages 148-158, February.
    9. repec:oup:ecpoli:v:29:y:2014:i:78:p:343-390 is not listed on IDEAS
    10. 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.
    11. Hoey, Sam & Peeters, Thomas & Principe, Francesco, 2021. "The transfer system in European football: A pro-competitive no-poaching agreement?," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    12. Christine Cooper & Joanne Johnston, 2012. "Vulgate accountability: insights from the field of football," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 25(4), pages 602-634, May.
    13. 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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