A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs

25 Pages Posted: 26 Jul 2014

See all articles by Egon P. Franck

Egon P. Franck

University of Zurich - Department of Business Administration (IBW)

Markus Lang

University of Lausanne - Faculty of Social and Political Sciences

Date Written: September 2014

Abstract

This paper analyzes the adverse incentive effects produced by money injections of benefactors [sugar daddies (SD)]. We show that the existence of a SD induces the club to choose a riskier investment strategy and the more the SD commits to bailout the club, the more the clubs’ optimal level of riskiness increases. Moreover, a private SD bails out the club less often than a public SD. Our model further shows that a ‘too‐big‐to‐fail’ phenomenon exists because it is optimal to always bailout a club if its market size is sufficiently large.

Suggested Citation

Franck, Egon P. and Lang, Markus, A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs (September 2014). Scottish Journal of Political Economy, Vol. 61, Issue 4, pp. 430-454, 2014, Available at SSRN: https://ssrn.com/abstract=2472491 or http://dx.doi.org/10.1111/sjpe.12052

Egon P. Franck (Contact Author)

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich 8032
Switzerland
+41 1 634 28 45 (Phone)

Markus Lang

University of Lausanne - Faculty of Social and Political Sciences

Quartier UNIL-Centre
Synathlon
Lausanne, 1015
Switzerland

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