Bourse et Football

Michel Aglietta (), Wladimir Andreff () and Bastien Drut
Additional contact information
Michel Aglietta: Université de Paris 10 Nanterre, EconomiX
Wladimir Andreff: University Paris 1 Panthéon Sorbonne

No 820, Working Papers from International Association of Sports Economists, North American Association of Sports Economists

Abstract: An empirical study of the Dow Jones Stoxx Football index exhibits a high volatility of the returns and share prices regarding a sample of floated clubs as well as an insufficient market depth (low and irregular traded volumes). The theoretical analysis of the relationship between market illiquidity and share price volatitlity does not rely on an insufficient funding by speculators who adopt “contrarian” behaviour but on the uncertainty attached to the fundamental value of football clubs. The outcome is multiple equilibria in the market for assets. From witnessing how brokers and specialised audits value three representative football clubs, it appears that it is extremely difficult to fix the actual fundamental value of a football business. The sporting performances of a club have a strong incidence on its share price all over the season (tested with English football clubs). Such result opens an avenue for further research about the fundamental value of a football club. Instead of considering – as in the Anglo-American view – that the stock market will discipline the governance and management of European football clubs, we show that it would be worth hardening the clubs’ budget constraint before their exposure to financial market evaluation. The financial crisis of European football is less harsh in France though it translates into big clubs accounting imbalances, a high volatitlity of their return on equity, and their lasting indebtedness. It is so despite the existing financial supervisory body which monitors French football (the so-called DNCG), contrarily to the situation in other European football leagues. A “weak” clubs’ governance is revealed by their reluctant account disclosure (eventually achieved) and their inability to curb wage inflation and handle player transfers. We test that the club budget constraint is softened by the television godsend which is a significant determinant of player wages. Spreading the “French model” of governance throughout European football still requires some progress, which is also a prerequisite for successful float of football club shares at the stock exchange. Ten recommendations are derived to improve football regulation.

JEL-codes: G12 G30 G34 L83 Z19 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2008-08
New Economics Papers: this item is included in nep-cfn and nep-spo
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Citations: View citations in EconPapers (14)

Forthcoming in Revue d’Economie Politique

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Related works:
Journal Article: Bourse et Football (2008)
Working Paper: Bourse et Football (2008)
Working Paper: Bourse et Football (2008)
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