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Insolvency in English professional football: Irrational Exuberance or Negative Shocks?

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Author Info

  • Stefan Szymanski

    ()
    (University of Michigan)

Abstract

Insolvency is an endemic problem in the world of European football. This paper uses a unique database of financial accounts for English football clubs between 1974 and 2010 to examine the causes of insolvency. Two alternative hypotheses are considered- “irrational exuberance”, meaning that owners attempt to achieve a significant improvement in league position which is not affordable, leading to financial crisis. This view seems widely espoused and seems to lie behind initiatives such as UEFA’s Financial Fair Play. An alternative is that club finances are subject to negative shocks – either to productivity or to demand- and that a series of such shocks can lead to insolvency. The empirical model provides evidence in support of this alternative hypothesis.

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File URL: http://college.holycross.edu/RePEc/spe/Szymanski_Insolvency.pdf
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Bibliographic Info

Paper provided by International Association of Sports Economists & North American Association of Sports Economists in its series Working Papers with number 1202.

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Length: 36 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:spe:wpaper:1202

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Related research

Keywords: Insolvency; football;

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References

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  1. D Forrest & R Simmons & B Buraimo, 2005. "Freedom of entry, market size and competitive outcome: evidence from English soccer," Working Papers 567322, Lancaster University Management School, Economics Department.
  2. Benno Torgler & Sascha Schmidt, 2007. "What shapes player performance in soccer? Empirical findings from a panel analysis," Applied Economics, Taylor & Francis Journals, vol. 39(18), pages 2355-2369.
  3. Stefan Szymanski & Ron Smith, 1997. "The English Football Industry: profit, performance and industrial structure," International Review of Applied Economics, Taylor & Francis Journals, vol. 11(1), pages 135-153.
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Cited by:
  1. PEETERS, Thomas & SZYMANSKI, Stefan, 2013. "Financial fair play in European football," Working Papers 2013021, University of Antwerp, Faculty of Applied Economics.

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