Goal! Profit maximization and win maximization in football leagues

Transcription

1 Working Paper Series, Paper No Goal! Profit maximization and win maximization in football leagues Pedro Garcia-del-Barro 1 and Stefan Szymanski 2 October 2006 Abstract In this paper we estimate the best responses of football clubs to the choices of other clubs in Spanish and English leagues over the period We find that choices are more closely approximated by win maximization than by profit maximization in both the short term and the long term. We examine club characteristics that might explain variations in choices between Spanish clubs. JEL Classification Codes: L83 Keywords: *We are indebted to Angel Barajas, Miguel Cardenal, Stephanie Leach, Joaquin Serrano, Carlos del Campo, Francesc Pujol, and Emilio Garcia-Silvero for their support and advice. Errors are our own. 1 Pedro Garcia-del-Barro, Universidad Internacional de Cataluna, Immaculada 22, Barcelona. Tel : (34) , Fax: (34) , pedro.garcia@upf.edu; and Universidad Pompeu-Fabra. The author gratefully acknowledges financial support from the Ministerio de Ciencia y Tecnologia (SEJ , Spain). 2 Stefan Szymanski, Tanaka Business School, Imperial College London, South Kensington campus, SW7 2AZ, UK. Tel : (44) , Fax: (44) , szy@imperial.ac.uk.

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21 Table 1. Operating profits in the Big Five European football leagues Profits (million ) English Premiership Spanish 1ª Liga Spanish 1ª Liga * a -143 a -152 a -295 b -511 b -302 b Italian Serie A German Bundesliga French Ligue Source: Deloitte&Touche Annual Review of Football Finance (2003, 2005). *Authors calculations from clubs accounts. Out of the 20 teams competing in the LFP, we mark with a the seasons in which 19 clubs accounts were used, while b implies that only 15 or 16 team accounts were available. Figure 1. Operating profits (England, Italy and Spain) England Spain Italy Table 2. Average revenues and average wages (as % of the revenues) for seasons. AvRevEuros) Spanish Football English Football Year N 1ª division N 2ª division N PremierLeague N Championship ,268, ,044, ,630, ,638, ,225, ,686, ,614, ,356, ,620, ,509, ,062, ,815, ,263, ,008, ,646, ,796, ,149, ,243, ,280, ,717, ,519, ,883, ,990, ,092, ,147, ,611, ,663, ,653, ,665, ,079, ,059, ,030, ,772, ,564, ,449, ,887, ,769, ,889, ,877, ,047, ,988, ,143, ,987, ,812,340 %AvWage Spanish Football English Football Year N 1ª division N 2ª division N PremierLeague N Championship % 1 48% 18 43% 17 60% % 1 94% 18 42% 16 65% % 4 68% 18 48% 15 75% % 5 91% 18 47% 14 67% % 9 72% 16 49% 16 70% % % 18 55% 14 73% % 11 82% 17 59% 14 94% % % 18 58% 16 98% % % 19 61% 16 73% % % 20 61% 16 90% % 1 85% 18 61% 18 71% The records for the English leagues have been converted to Euros at the current exchange rate (1GBP 1.47 Euros). N: indicates the number of teams for which the financial information was available each season.

22 Table 3. Revenues and league position. Dep.variable: logrelrev log(rev/avrev) Spanish LFP (1) (2) (3) Unbalanced Panel ( ) LogRank (9.75) logrelrev(-1) (14.3) Constant (-8.83) ols fixed effects IV fixed effects (6.06) (4.91) (-9.64) (5.94) (3.08) (-7.53) Instruments no no wages(-1) R F-statistic * No teams No obs Premier League (1b) (2b) (3b) Unbalanced Panel ( ) ols fixed effects IV fixed effects LogRank (10.1) logrelrev(-1) (20.6) Constant (-9.10) (12.9) (13.1) (-13.0) (11.7) (11.9) (-9.89) Instruments no no wages(-1) R F-statistic * No teams No obs Ols using robust standard errors. (t-statistics) in parenthesis. * Chi-2, instead of F-statistic, for model (3). Table 4. League position and wage expenditure. Dependent variable: logrank log(leagueposition/(43 leagueposition)) Spanish LFP (1) (2) (3) Unbalanced Panel ( ) ols fixed effects IV fixed effects log(wage/avw) (6.86) logrank(-1) (6.27) Constant (7.27) (3.09) (2.97) (6.60) (3.10) (2.47) (6.40) Instruments no no Win%(-1) & Div(-1) R F-statistic * No teams No obs Premier League (1b) (2b) (3b) Unbalanced Panel ( ) ols fixed effects IV fixed effects log(wage/avw) (9.67) logrank(-1) (9.75) Constant (3.89) (6.17) (5.82) (4.91) (5.14) (6.68) (3.85) Instruments no no Win%(-1) & Div(-1) R F-statistic * No teams No obs Ols using robust standard errors. (t-statistics) in parenthesis. * Chi-2, instead of F-statistic, for model (3).

23 Table 5. Profit maximizing and win-maximizing positions in the football leagues. Premier League.(1).(2).(3) Spanish LFP.(4).(5).(6) Average Real Position Max Wins Max Profit Average Real Position Max Wins Max Profit Manchester United RealMadrid Arsenal Barcelona Liverpool Valencia Chelsea Celta Newcastle United Deportivo Aston Villa Athletic Leeds United Valladolid TottenhamHotspur RealSociedad West Ham United Mallorca Southampton Malaga Blackburn Rovers Betis Everton Alaves Fulham Espanyol Leicester City AtMadrid Middlesbrough Zaragoza Wimbledon Oviedo Sunderland Racing Bolton Wanderers Sevilla Charlton Athletic RayoVallecano Coventry City Villarreal Derby County Tenerife Manchester City Recreativo Ipswich Town Sporting Sheffield Wednesday LasPalmas Birmingham City Salamanca Nottingham Forest Getafe Crystal Palace Compostela Wolverhampton Wander Numancia Barnsley Albacete Bradford City Levante Sheffield United Lleida Norwich City Logrones Queen's Park Rangers Leganes West Bromwich Albion Cordoba Preston North End Murcia Watford Hercules Portsmouth Stoke City Millwall Tranmere Rovers Burnley Gillingham Huddersfield Town Port Vale Stockport County Oxford United Reading Southend United Crewe Alexandra Grimsby Town Oldham Athletic Walsall Swindon Town Luton Town Bury

24 Table 6. Deviations from the profit-maximizing and winmaximizing position. Spanish LFP (unbalanced) English leagues (unbalanced) Variable N mean sum N mean sum (pm - p) (wm - p) ((pm - p)^2)/n ((wm p)^2)/n (pm - p) is the difference between the profit-maximizing position and the real one. (wm - p) subtracts instead the actual position from the win-maximizing (or zero-profit) position. 9

25 Table 7. Factors explaining deviations from the profit maximizing position. Spanish LFP (1ª and 2ª Division) Spanish LFP (1ª Division) Variables Coeff. t-stat P-value Coeff. t-stat P-value SecondDivision ** HistoricalStatus ** * RelegationRisk 2.74 ** * AssociativeClub ControlConcentr DirectorReward AtleticBilbao HomeGrown% YearsPresident ** ** Businessman 2.80 * Constructor 4.49 ** ** Economist Lawyer MedicalDoctor _cons ** ** R No obs F-statistic 18.2 ** 2.69 ** Cook-Weisberg Shapiro-Wilk ** Indicates significant at 1% and * at 5% Dependent variable LeagPositPurch number of positions that the club "purchase" respect to the maximizing-profits position [profitmaximizingposit - realposition] Explanatory variables SecondDivision dummy gathering the teams in the second division league. HistoricalStatus ranking of the teams as indicated by the historical cumulative points obtained in the 74 editions of 1ª division LFP, until RelegationRisk dummy for teams that, on average in the period, find themselves within 4 positions from the relegation-promotion positions (namely, between position 16 and 24 or between 38 and 46). AssociativeClub dummy for the clubs which are not shareholders companies [namely: Barcelona, RealMadrid, Bilbao, Osasuna]. ControlConcentr dummy for teams with a high degree of control concentration (the proportion of shares controlled by the same owner or entrepreneurial group is above 80% of the total capital). Based on Barajas (2005), Table 4.2, p DirectorReward dummy for teams which rewarded the members of its board of directors at 30/6/2000. Source: Barajas (2005), Table 4.3, p (1: teams that pay; 0: do not pay. Teams for which this information was not available were given value zero). AtleticBilbao dummy for the Athletic Club de Bilbao. HomeGrown% percentage or share of home-grown players for each team and season. YearsPresident years in which the same president is in the club. Businessman dummy for teams whose president is a businessman. Constructor dummy for teams whose president is a manager in a construction company. Economist dummy for teams whose president is an economist. Lawyer dummy for teams whose president is a lawyer. MedicalDoctor dummy for teams whose president is medical doctor. %

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27 Table A1. Profit maximizing and win-maximizing positions in the football leagues. Premier League.(1).(2).(3) Spanish LFP.(4).(5).(6) Average Real Position Max Wins Max Profit Average Real Position Max Wins Max Profit Manchester United RealMadrid Arsenal Barcelona Liverpool Valencia Chelsea Celta Newcastle United Deportivo Aston Villa Athletic Leeds United Valladolid TottenhamHotspur RealSociedad West Ham United Mallorca Southampton Malaga Blackburn Rovers Betis Everton Alaves Fulham Espanyol Leicester City AtMadrid Middlesbrough Zaragoza Wimbledon Oviedo Sunderland Racing Bolton Wanderers Sevilla Charlton Athletic RayoVallecano Coventry City Villarreal Derby County Tenerife Manchester City Recreativo Ipswich Town Sporting Sheffield Wednesday LasPalmas Birmingham City Salamanca Nottingham Forest Getafe Crystal Palace Compostela Wolverhampton Wander Numancia Barnsley Albacete Bradford City Levante Sheffield United Lleida Norwich City Logrones Queen's Park Rangers Leganes West Bromwich Albion Cordoba Preston North End Murcia Watford Hercules Portsmouth Stoke City Millwall Tranmere Rovers Burnley Gillingham Huddersfield Town Port Vale Stockport County Oxford United Reading Southend United Crewe Alexandra Grimsby Town Oldham Athletic Walsall Swindon Town Luton Town Bury

28 @" 2) & Table A2. Deviations from the profit-maximizing and winmaximizing position. Spanish LFP English leagues Variable N mean sum N mean Sum (pm - p) (wm - p) ((pm - p)^2)/n ((wm p)^2)/n (pm - p) is the difference between the profit-maximizing position and the real one. (wm - p) subtracts instead the actual position from the win-maximizing (or zero-profit) position. 6) " ("(" #"&1 " #!"" ""# (( * & 0 " &6 &C#" 0 # &1 ( "( 0 #"""0 85:0 #" &C##" " 0 #""8 #"# 0 #"" # :& F * #""0 #" "" &@ #0 "" 0 &, "( #""# #"#" 5

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