Has UEFA’s Financial Fair Play Regulation Increased Football Clubs’ Profitability?

Forthcoming, European Sport Management Quarterly, DOI: 10.1080/16184742.2020.1820062

Posted: 12 Nov 2020

See all articles by Santeri Ahtiainen

Santeri Ahtiainen

Aalto University - School of Business

Henry Jarva

Hanken School of Economics

Date Written: September 23, 2020

Abstract

Research question: In response to the low profitability of European football clubs, in 2010, UEFA established its Financial Fair Play regulation (FFP) to encourage clubs not to spend more than they earn. We examine whether FFP’s break-even rule has increased the profitability of football clubs.

Research methods: We use data from the top five European football leagues (those of England, France, Germany, Italy, and Spain) over the period 2008–2016. Our sample includes 1,094 club-year observations (139 different clubs). Earnings before interest and taxes (EBIT) and profit before tax (PBT) margins are used as profitability measures. The impact of FFP is estimated using the Generalized Estimation Equations (GEE), logistic regressions, and fixed effects OLS models. We control for both domestic and European competition success, leverage, club size, and country/club fixed effects.

Results and Findings: In the pre-FFP period, roughly 70 percent of observations are losses, whereas in the post-FFP period, roughly 60 percent of observations are losses. However, the estimated positive effect is significant only in Spain, while for England and Germany we find weak evidence. We cannot rule out that the observed improvement in performance is simply caused by the recovery from the financial crisis. The effect of FFP is insignificant in France and Italy.

Implications: The effect of FFP on clubs’ profitability has been at best modest. We call upon UEFA and its member associations and leagues to expand their efforts to enforce the break-even rule or to reassess the efficiency of current FFP requirements.

Keywords: Break-even rule, financial fair play regulation, FFP, football, profitability

JEL Classification: M41, Z23

Suggested Citation

Ahtiainen, Santeri and Jarva, Henry, Has UEFA’s Financial Fair Play Regulation Increased Football Clubs’ Profitability? (September 23, 2020). Forthcoming, European Sport Management Quarterly, DOI: 10.1080/16184742.2020.1820062, Available at SSRN: https://ssrn.com/abstract=3697942

Santeri Ahtiainen

Aalto University - School of Business ( email )

Helsinki
Finland

Henry Jarva (Contact Author)

Hanken School of Economics ( email )

PB 287
Helsinki, Vaasa 65101
Finland

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