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Governance Failure and Financial Crisis in German Football

Author

Listed:
  • Helmut M. Dietl

    (University of Zurich)

  • Egon Franck

    (University of Zurich)

Abstract

The peculiar German football governance structure may be well suited to prevent integrity problems resulting from multiple club ownership or from ownership by "undesired'' persons or entities. However, this effect comes at a price. In the vacuum of power generated within large member associations, residual rights of control are de facto allocated to representatives who do not hold residual claims. Because these representatives externalize substantial parts of the risk associated with investment decisions, they are particularly ill-suited for managing the business of professional football, which has been transformed into a "gamble on success'' by ever-increasing revenue differentials between winners and losers. At the same time, low accounting standards for members clubs, combined with "soft'' law enforcement, invite club representatives to hide their consumption on the job behavior until their clubs are insolvent.

Suggested Citation

  • Helmut M. Dietl & Egon Franck, 2007. "Governance Failure and Financial Crisis in German Football," Journal of Sports Economics, , vol. 8(6), pages 662-669, December.
    • Handle: RePEc:sae:jospec:v:8:y:2007:i:6:p:662-669
    DOI: 10.1177/1527002506297022
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    References listed on IDEAS

    as
    1. Bernd Frick & Joachim Prinz, 2006. "Crisis? What Crisis? Football in Germany," Journal of Sports Economics, , vol. 7(1), pages 60-75, February.
    2. Umberto Lago & Rob Simmons & Stefan Szymanski, 2006. "The Financial Crisis in European Football," Journal of Sports Economics, , vol. 7(1), pages 3-12, February.
    3. Jean-Jacques Gouguet & Didier Primault, 2006. "The French Exception," Journal of Sports Economics, , vol. 7(1), pages 47-59, February.
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