Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer

47 Pages Posted: 7 Jul 2004

See all articles by Eberhard Feess

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH

Bernd Frick

University of Witten/Herdecke - Institute of Economics and Business Administration

Gerd Muehlheusser

University of Hamburg; IZA Institute of Labor Economics

Date Written: June 2004

Abstract

We perform a theoretical and empirical analysis of the impact of transfer fee regulations on professional soccer in Europe. Based on a model of the interaction of moral hazard and heterogeneity, we show (i) how the regulations effect contract durations and wages, (ii) that contracting parties have an incentive to agree upon inefficiently long contracts, (iii) how these incentives vary with the legal system, and (iv) how the relationship between contract duration and performance also depends on the legal system. With one exception, all theoretical results are empirically confirmed using a comprehensive data set from the top German Soccer League (Bundesliga).

Keywords: Labor contracts, Bosman judgement, empirical contract theory

JEL Classification: J41, L83

Suggested Citation

Feess, Eberhard and Frick, Bernd and Muehlheusser, Gerd, Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer (June 2004). IZA Discussion Paper No. 1180. Available at SSRN: https://ssrn.com/abstract=562445

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Bernd Frick

University of Witten/Herdecke - Institute of Economics and Business Administration ( email )

D-58448 Witten
Germany

Gerd Muehlheusser (Contact Author)

University of Hamburg ( email )

Von Melle Park 5
Hamburg, 20146
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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