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

Author

Listed:
  • Marc Rohde
  • Christoph Breuer

Abstract

US owners at Manchester United, Arsenal London, and Liverpool; Arab owners at Manchester City; Russian owners at Chelsea London ¨C 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.

Suggested Citation

  • Marc Rohde & Christoph Breuer, 2016. "The Financial Impact of (Foreign) Private Investors on Team Investments and Profits in Professional Football: Empirical Evidence from the Premier League," Applied Economics and Finance, Redfame publishing, vol. 3(2), pages 243-255, May.
    • Handle: RePEc:rfa:aefjnl:v:3:y:2016:i:2:p:243-255
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    Citations

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    Cited by:

    1. Antoine Feuillet & Loris Terrettaz & Mickaël Terrien, 2023. "Farmers league: squad structure and resource dependency The case of French Ligue1," Post-Print hal-04323874, HAL.
    2. Marc Rohde & Christoph Breuer, 2016. "Europe’s Elite Football: Financial Growth, Sporting Success, Transfer Investment, and Private Majority Investors," IJFS, MDPI, vol. 4(2), pages 1-20, June.
    3. John K. Malagila & Alaa M. Zalata & Collins G. Ntim & Ahmed A. Elamer, 2021. "Corporate governance and performance in sports organisations: The case of UK premier leagues," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2517-2537, April.
    4. Joseph Kolawole-ABON & Rufus O. ADEBAYO, 2021. "Potential Professional Football Club: A Business-Oriented Organisation," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(1), pages 27-45, May.
    5. Havran, Zsolt & András, Krisztina, 2022. "A puha költségvetési korlát szindrómája a hivatásos labdarúgásban. Kitekintés a nemzetközi és a magyarországi sajátosságokra [The soft-budget constraint in professional football syndrome. A view of," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 230-254.
    6. Marc Rohde & Christoph Breuer, 2018. "Competing by investments or efficiency? Exploring financial and sporting efficiency of club ownership structures in European football," Sport Management Review, Taylor & Francis Journals, vol. 21(5), pages 563-581, December.
    7. Holzmayer, Florian & Schmidt, Sascha L., 2020. "Dynamic managerial capabilities, firm resources, and related business diversification – Evidence from the English Premier League," Journal of Business Research, Elsevier, vol. 117(C), pages 132-143.
    8. Lukas Richau & Florian Follert & Monika Frenger & Eike Emrich, 2021. "The sky is the limit?! Evaluating the existence of a speculative bubble in European football," Journal of Business Economics, Springer, vol. 91(6), pages 765-796, August.
    9. Richau, Lukas & Follert, Florian & Frenger, Monika & Emrich, Eike, 2021. "The Rainmaker?! The impact of investors on transfer fees in the English Premier League," Working Paper 187/2021, Helmut Schmidt University, Hamburg.

    More about this item

    Keywords

    Sports finance; majority investors; foreign owners; property rights theory; resource-based view; overinvestment; profitability; soccer;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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