UEFA financial fair play’s effect on the salary-to-revenue ratios of European professional football clubs – Evidence from top five football leagues in Europe

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Journal Title

Journal ISSN

Volume Title

School of Business | Master's thesis

Authors

Date

2017

Department

Laskentatoimen laitos

Major/Subject

Mcode

Degree programme

Accounting

Language

en

Pages

81

Series

Abstract

Objectives of the study This study examines whether the adoption of UEFA’s Financial Fair Play regulation has re-duced the salaries in relation to revenues in the top five football leagues in Europe. The study applies Soft Budget Constraint theory to explain the peculiar operating environment of Euro-pean professional football, and explores whether the Break-Even requirement of Financial Fair Play regulation has shifted the European footballing environment towards financially re-sponsible behaviour. Data and methodology The study is quantitative in nature and applies robust pooled OLS regression to detect chang-es in salary-to-revenue –ratios after the introduction of Financial Fair Play regulation. The sample consists of 79 football clubs from England, Spain, Germany, Italy and France between seasons 2008/09 –2014/15 and the data is mainly obtained from ORBIS –database. In case of missing data, the dataset has been complemented with data from the annual reports of the clubs. Results The findings of this study suggest that the Financial Fair Play regulation has reduced salaries in relation to revenues in the top five leagues in Europe. More specifically, the salary-to-revenue –ratios have been reduced the most in Spain and in England, whereas the regulation has not had any effect in Germany. Furthermore, teams that have not qualified for UEFA’s competitions, namely Champions League and Europa League, have reduced their salary-to-revenue –ratios remarkably. No such effect could be found on teams that have qualified for international football. The results of this study indicate that the Financial Fair Play regulation has shifted the Soft Budget Constraint environment of European professional football towards more financially responsible behaviour.

Description

Thesis advisor

Huikku, Jari

Keywords

financial fair play, break-even requirement, UEFA, salary-to-revenue –ratio, soft budget constraint, football, soccer

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Citation

Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-201706135555

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[gradu] Kauppakorkeakoulu / BIZ