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

Stefan Szymanski

No 1202, Working Papers from International Association of Sports Economists, North American Association of Sports Economists

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.

Keywords: Insolvency; football (search for similar items in EconPapers)
JEL-codes: G33 G38 L83 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-10
New Economics Papers: this item is included in nep-spo
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Citations: View citations in EconPapers (16)

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