The Consequences of Accounting-Based Regulation: Real Effects on European Football Players Transfer Market

52 Pages Posted: 6 Dec 2021 Last revised: 30 May 2023

See all articles by Massimiliano Bonacchi

Massimiliano Bonacchi

Free University of Bolzano - Faculty of Economics and Management; Stern School of Business, New York University

Fabio Ciaponi

University of L'Aquila

Antonio Marra

Bocconi University - Department of Accounting

Ron Shalev

University of Toronto - Rotman School of Management

Date Written: December 1, 2021

Abstract

We investigate the effects of the Financial Fair Play (FFP) regulation, which requires clubs participating in European football1 competitions to comply with the break-even rule. The break-even rule is a strict earnings-based threshold that treats gain from sale of club productive assets—the contracts of football players—similar to operating profits for the purpose of compliance. We find the overall volume of transfers of players as well as the volume of transfers of young players both increased following the regulation, with stronger effects in clubs subject to the regulation. We also find the average club gains recorded on players’ transfers increased significantly following FFP for clubs subject to the regulation, and that these gains directly link to incentives to beat the break-even threshold. Finally, we find that following FFP clubs use exchange transfers—where no cash is involved—to inflate transfer fees to comply with the break-even rule. Overall, we provide evidence on the potential externalities of accounting-based regulation, which likely has broader implications for using accounting quantities in policy-making.

Keywords: Accounting Regulation; Earnings Management; Accounting and Real Effects; Regulation in Sports.

JEL Classification: A11, G18, G38, L51, M41, M48, Z22

Suggested Citation

Bonacchi, Massimiliano and Ciaponi, Fabio and Marra, Antonio and Shalev, Ron, The Consequences of Accounting-Based Regulation: Real Effects on European Football Players Transfer Market (December 1, 2021). Available at SSRN: https://ssrn.com/abstract=3978117 or http://dx.doi.org/10.2139/ssrn.3978117

Massimiliano Bonacchi

Free University of Bolzano - Faculty of Economics and Management ( email )

Universitätsplatz, 1
Bozen-Bolzano, BZ 39100
Italy
+39 0471 013290 (Phone)

HOME PAGE: http://www.unibz.it/en/economics/people/StaffDetails.html?personid=35968&hstf=35968

Stern School of Business, New York University ( email )

40 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://www.stern.nyu.edu/faculty/bio/massimiliano-bonacchi

Fabio Ciaponi

University of L'Aquila ( email )

L’Aquila
Italy
+39 0862434818 (Phone)

Antonio Marra (Contact Author)

Bocconi University - Department of Accounting ( email )

Via Roentgen 1
Milan, 20136
Italy

Ron Shalev

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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