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Value‐maximizing football clubs

Aloys Prinz and Stefan Thiem

Scottish Journal of Political Economy, 2021, vol. 68, issue 5, 605-622

Abstract: In this paper, football clubs are modeled as value‐maximizing enterprises. With a long‐term perspective in this framework, players are not only factors of production, but also assets of the club. It is shown that talent investment is higher with value‐maximization than with profit maximization for homogeneous football clubs. Club heterogeneity is then modeled by different time‐horizons regarding future profits, which leads to asymmetric levels of talent investment. Teams with longer time‐horizons demand more talent and tilt the competition to their favor. Increases in transfer prices for players worsen the competitive balance, while higher player wages improve it.

Date: 2021
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Handle: RePEc:bla:scotjp:v:68:y:2021:i:5:p:605-622