Making Money from Football

In: Business and Management

Submitted By omega30
Words 7880
Pages 32
Making money out of football

Stefan Szymanski[1]
Stephen Hall

The Business School, Imperial College London

April 2003

Abstract: In the US most economists have argued that professional sports teams are profit maximising businesses, but it is a widely held view in Europe that professional football clubs are not run on a profit maximising basis. This belief has important implications for the impact of policy measures such as income redistribution that are widely advocated. This paper looks at the performance of sixteen English football clubs that acquired a stock exchange listing in the mid 1990s. If the European story is true, we should have observed a shift toward profit maximising behaviour at these clubs. This paper finds no evidence of any shift in this direction. This result is consistent with the view that football clubs in England have been much more oriented toward profit objectives than is normally allowed.

Keywords: economics of sport, objective functions
JEL classification number: L21, L83

We thank to Dirk Nitzsche for assistance with data collection. We thank Peter Sloane and seminar participants at the CARR Outreach workshop on business history for helpful comments.

“Those clubs which have floated to become public companies – Manchester United, Newcastle United, Aston Villa, Chelsea, Tottenham- now have as their principal objective the making of money for their shareholders.”

-David Conn, The Football Business, p154.

1. Introduction

In North America it is commonplace, especially among economists, to think of the owners of professional sports teams as profit maximisers (see e.g. Fort and Quirk (1995)). In Europe, however, this assumption has been treated somewhat sceptically. In an influential paper Sloane (1971) argued that a plausible characterisation of the owners of…...

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