Bourse et Football
In this article, we analyse various issues linked to the quotation of European professional football clubs on a stock exchange. An empirical study of the Dow Jones Stoxx Football index exhibits a high volatility of returns and share prices regarding a sample of floated clubs as well as an insufficient market depth. The relationship between market illiquidity and share price volatitlity does not rely on an insufficient funding by speculators who adopt “contrarian” behaviour but on the uncertainty attached to the fundamental value of football clubs. From witnessing how brokers and specialised audits value three representative football clubs, it appears that it is extremely difficult to fix the actual fundamental value of a football business. The sporting performances of a club have an incidence on its share price all over the season and are of drivers the fundamental value variations of a football club. Instead of considering that the stock market will discipline the governance and management of European football clubs, we show that it would be worth hardening the clubs’ budget constraint before their exposure to financial market evaluation. The financial crisis of European football is less harsh in France though it translates into big clubs accounting imbalances, a high volatitlity of their return on equity, and their lasting indebtedness. It is so despite the existing financial supervisory body which monitors French football, contrarily to the situation in other European football leagues. A weak clubs’ governance is revealed by their reluctant account disclosure and their inability to curb wage inflation and handle player transfers. The club budget constraint is softened by the television godsend which is a significant determinant of player wages. Spreading the French model of governance throughout European football still requires some governance improvement, which is also a prerequisite for successful float of football club shares in the stock market. Ten recommendations are derived to improve football regulation.
Volume (Year): 118 (2008)
Issue (Month): 2 ()
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