Governing the League: Credible Threats, Intervention Rights, and Social Ties in Football Competition Licensing

NRG Working Paper No. 08-05

25 Pages Posted: 14 May 2008 Last revised: 28 Jan 2012

See all articles by Roland F. Spekle

Roland F. Spekle

Nyenrode Business University

Teije Smittenaar

Nyenrode Business University

Date Written: October 2011

Abstract

We examine the comparative effectiveness of three alternative licensing systems in professional football. The three systems’ main concern is with the promulgation of responsible financial behaviour among football clubs. To that effect, all three systems rely on entry control and ex ante budget approval rights. However, the three structures also differ, especially with regard to the way in which they seek to impose ex post budgetary discipline. We analyse these differences, using Transaction Cost Economics as our basic frame of reference. Both theoretically and empirically, we demonstrate that the effectiveness of the licensing arrangements depends on the credibility of the punitive measures available to the governing body. We also find evidence to suggest that social ties may partly substitute for formal intervention rights.

Keywords: Licensing, Governance structure effectiveness, Credible threats, Transaction Cost Economics

JEL Classification: D23, D45, L14

Suggested Citation

Spekle, Roland F. and Smittenaar, Teije, Governing the League: Credible Threats, Intervention Rights, and Social Ties in Football Competition Licensing (October 2011). NRG Working Paper No. 08-05, Available at SSRN: https://ssrn.com/abstract=1130705 or http://dx.doi.org/10.2139/ssrn.1130705

Roland F. Spekle (Contact Author)

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

Teije Smittenaar

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

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