Regulatory own goals

Myself and Dr Ronan Gallagher recently published a paper investigating the unintended consequences of economic regulation in professional football.

In 2010, the governing body of European football, UEFA, approved ‘Financial Fair Play’ regulations. Designed to encourage financial discipline, promote stability and foster competitive balance, they focus on a financial breakeven constraint. We analyse the impact of such constraints on the joint sporting and financial efficiency of English football clubs.

Our empirical design models the simultaneous production of both sporting and financial outputs using stochastic, non-parametric efficiency analysis. The sample is an unbalanced panel representing 60 clubs spanning the 2003/2004 to 2016/2017 seasons.

We find the Financial Fair Play breakeven regulation reduces average club efficiency, raises the relative importance of financial goals (capturing revenue share) whilst lowering the relative importance of sporting goals (capturing point share). The efficiency costs of regulation are not borne equally by clubs.

Our findings imply the breakeven regulations reduce the joint sporting and financial efficiency of regulated clubs, with the efficiency loss positively related to the severity of the breakeven constraint. The Financial Fair Play regulations further entrench the financial and sporting power of elite clubs and potentially undermine league competitive intensity by shifting the relative focus of clubs away from sporting productivity toward financial productivity.

A special note of thanks must go to Professor John Turner for the catchy paper title, and some excellent critique on the working paper versions. Thanks also to Ashleigh Neill for her exhaustive working in correct our poor Norn Irish english and grammar.

Gallagher, R., & Quinn, B. (2019). Regulatory own goals: the unintended consequences of economic regulation in professional football. European Sport Management Quarterly, 1–20. (ABS 3* ranked journal)