The sky is the limit?! Evaluating the existence of a speculative bubble in European football

Lukas Richau (), Florian Follert, Monika Frenger and Eike Emrich
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Lukas Richau: Helmut-Schmidt-University
Florian Follert: Seeburg Castle University
Monika Frenger: Saarland University
Eike Emrich: Saarland University

Journal of Business Economics, 2021, vol. 91, issue 6, No 2, 765-796

Abstract: Abstract In light of increasing salaries and transfer fees, the present study investigates the existence of a speculative bubble in European football. By applying the Kindleberger–Minsky model to football, we show that developments in recent years do not meet the criteria of a classic bubble. Although transfer fee spending in recent years does meet the typical pattern seen in historical bubbles, the case of football rather resembles an atypical bubble. This is because the rise in transfer fees for most clubs is largely backed by cash inflows, prompting an elevator effect for transfer fees. Typical bubbles, on the other hand, contain heavy debt-financing in the absence of respective and sustainable cash inflows. Nevertheless, despite the absence of a speculative bubble on the aggregated league level, some individual clubs seem to “live in a bubble”. Furthermore, the French and especially Italian leagues should be cautious about overspending. We further discuss the main risk factors that can lead to a turning point in European football’s constant revenue growth, including potential implications of a financial downturn.

Keywords: Speculative bubbles; Kindleberger-Minsky model; Football; Transfer market; Financial investors; Football TV broadcasting (search for similar items in EconPapers)
JEL-codes: G40 Z22 Z23 Z29 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11573-020-01015-8

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