The Economics of Competitive Sports

The Economics of Competitive Sports

New Horizons in the Economics of Sport series

Edited by Plácido Rodríguez, Stefan Késenne and Ruud Koning

The essence of any sports contest is competition. The very unpredictability of a sporting outcome distinguishes it from, say, an opera performance. This volume presents a state of the art overview of the economics of competitive sport along two main themes. In the first part, the discussion centers on the organization of sports and competition. The second part deals with the competitive balance, rewards and outcomes of the actual contests.

Chapter 5: Long-term and short-term causes of insolvency and English football

Stefan Szymanski

Subjects: economics and finance, sports


Insolvency is a common problem among European football clubs. While the Union of European Football Associations’ (UEFA’s) Financial Fair Play initiative is often discussed in relation to controlling wealthy individuals (the so-called ‘sugar daddies’) who bankroll expensive teams, an alternative interpretation is that it is intended to reduce the incidence of insolvency. The Union of European Football Associations’ ‘no overdues payable’ rule is a way of imposing a sporting sanction on financial delinquency. UEFA’s own research reveals that the problem is significant. In their 2011 survey of the accounts of clubs in the top division of each of its 53 member associations (679) they found that over the past five years net losses had increased from €0.6 billion to €1.7 billion, that 63 per cent of clubs reported an operating loss and 55 per cent reported a net loss overall. Thirty-eight per cent of clubs reported negative net equity, and 16 per cent of club accounts reviewed contained a qualification expressed by the auditors as to financial viability of the company. Insolvency means the incapacity to meet one’s debt obligations (when referring to a person we talk of bankruptcy, but insolvency when talking about a corporation). In this situation the law allows creditors to take action to recover their debts, effectively removing control of the company from the board of directors.

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