Spending money is like water soaking into the sand: anticipating financial distress in Japanese professional football clubs

Sarthak Mondal, Daniel Plumley and Rob Wilson

Journal of Applied Accounting Research, 2024, vol. 26, issue 1, 171-193

Abstract: Purpose - This paper analyses J1 League and J2 League clubs during the period 2011–2020 to anticipate financial distress. Design/methodology/approach - Data were collected for 29 professional football clubs competing in the J1 and J2 League for the financial years ending 2011–2020. Analysis was conducted using Altman’s Z-score methodology and additional statistical tests were conducted to measure differences between groups. Findings - The results show significant cases of financial distress amongst clubs in both divisions and that clubs that have played predominantly in the J1 League are in significantly poorer financial health than clubs that have played predominantly in the J2 League. Overall, the financial situation in Japanese professional football needs to be monitored, a position that could be exacerbated by the economic crisis, caused by the coronavirus disease 2019 (COVID-19). Research limitations/implications - While the financial situation for a majority of the clubs in the J-League presents an austere picture, comparison with clubs in other leagues across Asia and Europe and understanding the different policies set by these leagues would enable us to understand whether the phenomenon of financial distress is common to other clubs and leagues across different countries and continents. Practical implications - The paper recommends that J-League visit the existing club licensing criteria and implement equitable cost-control measures, such as implementing a cap on acceptable losses over a specified period or restricting overall expenditures as a percentage of the club’s revenue. Originality/value - The paper extends the evidence base of measuring financial distress in professional team sports and is also the first paper of its kind to examine this in relation to Asian professional football.

Keywords: Financial crisis; Z-score; Asian professional football; J-league; AFC club licensing criteria (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaarpp:jaar-12-2023-0394

DOI: 10.1108/JAAR-12-2023-0394

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