Oct 2, 2006 - 2Stefan Szymanski, Tanaka Business School, Imperial College London, South. Kensington .... transformed themselves into limited liability companies. ... During this era support for a football team was perceived to be one.
Working Paper Series, Paper No. 06-21
Goal! Profit maximization and win maximization in football leagues Pedro Garcia-del-Barro1 and Stefan Szymanski2
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 1994-2004. 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, 08017 Barcelona. Tel : (34) 93 2541800, Fax: (34) 93 4187673, e-mail: pedro.garcia@upf.edu; and Universidad Pompeu-Fabra. The author gratefully acknowledges financial support from the Ministerio de Ciencia y Tecnologia (SEJ2004-04649, Spain). 2
Stefan Szymanski, Tanaka Business School, Imperial College London, South Kensington campus, SW7 2AZ, UK. Tel : (44) 20 7594 9107, Fax: (44) 20 7823 7685, e-mail: szy@imperial.ac.uk.
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Table 1. Operating profits in the “Big Five” European football leagues Profits (million €)
1996
English Premiership
1997
1998
1999
2000
77
129
143
104
Spanish 1ª Liga
-23
19
-124
-170
Spanish 1ª Liga * Italian Serie A
-21
17
a
-3
8
-101 -36
-143 -114
-152 -46
German Bundesliga French Ligue 1
5
a
2001
2002
2003
2004
185
223
80
121
125
a
-295 -216
b
-511 -404
-302 -381
b
b
-341
37
27
47
35
87
100
138
52
-7
-46
-70
36
-41
-98
-61
-102
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). 400 200
England
0
Spain
-200
Italy
-400 -600 1996
1997
1998
1999
2000
2001
2002
2003
2004
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
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1 5 19 20 18 19 19 16 15 15 11
4,268,892 9,225,842 15,620,150 24,263,940 29,149,850 30,519,530 34,147,940 35,665,650 41,772,720 48,769,060 58,988,410
1 1 4 5 9 10 11 12 11 11 1
3,044,909 2,686,473 2,509,873 4,008,501 6,243,958 4,883,988 6,611,016 7,079,504 5,564,037 3,889,198 4,143,813
18 18 18 18 16 18 17 18 19 20 18
19,630,924 24,614,092 27,062,053 35,646,941 50,280,071 53,990,072 63,663,877 74,059,982 86,449,068 91,877,205 100,987,045
17 16 15 14 16 14 14 16 16 16 18
6,638,792 6,356,702 6,815,186 8,796,836 12,717,063 11,092,033 13,653,991 14,030,414 19,887,189 16,047,064 18,812,340
%AvWage
Spanish Football
English Football
Year
N
1ª division
N
2ª division
N
PremierLeague
N
Championship
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1 5 19 20 18 19 19 16 15 15 11
73% 68% 55% 45% 54% 55% 55% 70% 73% 70% 63%
1 1 4 5 9 10 11 12 11 11 1
48% 94% 68% 91% 72% 102% 82% 104% 138% 140% 85%
18 18 18 18 16 18 17 18 19 20 18
43% 42% 48% 47% 49% 55% 59% 58% 61% 61% 61%
17 16 15 14 16 14 14 16 16 16 18
60% 65% 75% 67% 70% 73% 94% 98% 73% 90% 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.
Table 3. Revenues and league position. Dep.variable: logRelRev = log(Rev/AvRev) Spanish LFP
Unbalanced Panel (1994-2004)
LogRank logRelRev(-1) Constant Instruments 2 R F-statistic * No teams No obs. Premier League Unbalanced Panel (1994-2004)
LogRank logRelRev(-1) Constant Instruments R2 F-statistic * No teams No obs.
(1)
(2)
(3)
ols
fixed effects
IV fixed effects
0.295 (9.75) 0.636 (14.3) -0.412 (-8.83)
0.240 (6.06) 0.338 (4.91) -0.499 (-9.64)
0.241 (5.94) 0.333 (3.08) -0.501 (-7.53)
no 0.867 736.6 37 189
no 0.862 36.97 37 189
wages(-1)
(1b)
(2b)
(3b)
ols
fixed effects
IV fixed effects
0.184 (10.1) 0.698 (20.6) -0.150 (-9.10)
0.183 (12.9) 0.477 (13.1) -0.215 (-13.0)
0.173 (11.7) 0.561 (11.9) -0.189 (-9.89)
no 0.913 2812 57 432
no 0.909 242.6 57 432
wages(-1)
0.861 385.7 37 189
0.913 1217 57 432
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 (1994-2004)
log(Wage/AvW) logRank(-1) Constant Instruments R2 F-statistic * No teams No obs. Premier League Unbalanced Panel (1994-2004)
log(Wage/AvW) logRank(-1) Constant Instruments R2 F-statistic * No teams No obs.
ols
fixed effects
IV fixed effects
0.706 (6.86) 0.357 (6.27) 0.734 (7.27)
0.618 (3.09) 0.189 (2.97) 0.798 (6.60)
0.634 (3.10) 0.177 (2.47) 0.812 (6.40)
no 0.643 173.3 40 236
no 0.639 15.73 40 236
Win%(-1) & Div(-1)
0.637 190.0 40 236
(1b)
(2b)
(3b)
ols
fixed effects
IV fixed effects
0.963 (9.67) 0.512 (9.75) 0.211 (3.89)
1.032 (6.17) 0.324 (5.82) 0.273 (4.91)
0.889 (5.14) 0.414 (6.68) 0.223 (3.85)
no 0.744 608.3 57 432
no 0.739 76.31 57 432
Win%(-1) & Div(-1)
0.743 181.6 57 432
Ols using robust standard errors. (t-statistics) in parenthesis. * Chi-2, instead of F-statistic, for model (3).
Table 5. Profit maximizing and win-maximizing positions in the football leagues. Premier League Average 1993-2004 Manchester United Arsenal Liverpool Chelsea Newcastle United Aston Villa Leeds United TottenhamHotspur West Ham United Southampton Blackburn Rovers Everton Fulham Leicester City Middlesbrough Wimbledon Sunderland Bolton Wanderers Charlton Athletic Coventry City Derby County Manchester City Ipswich Town Sheffield Wednesday Birmingham City Nottingham Forest Crystal Palace Wolverhampton Wander Barnsley Bradford City Sheffield United Norwich City Queen' s Park Rangers West Bromwich Albion Preston North End Watford 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
.(1)
.(2)
.(3)
Real Position
Max Wins
Max Profit
2 3 4 6 7 8 8 11 12 13 13 14 14 14 15 15 20 20 20 21 21 22 22 22 22 23 25 27 27 28 29 30 30 30 32 32 32 33 34 34 34 35 35 37 37 38 38 38 38 39 39 40 41 41 42
5 9 11 9 8 12 12 12 14 14 19 16 20 14 17 15 14 14 16 19 20 18 18 19 19 20 18 18 20 19 22 20 26 15 23 24 25 20 24 23 23 18 27 25 25 30 29 23 22 28 24 24 26 22 31
23 29 33 30 29 33 34 33 35 35 38 36 39 35 37 36 35 35 37 38 39 37 37 38 39 39 38 37 39 38 40 39 41 36 40 40 40 38 40 40 40 38 41 41 41 42 42 40 40 42 41 41 41 40 43
Spanish LFP Average 1994-2005 RealMadrid Barcelona Valencia Celta Deportivo Athletic Valladolid RealSociedad Mallorca Malaga Betis Alaves Espanyol AtMadrid Zaragoza Oviedo Racing Sevilla RayoVallecano Villarreal Tenerife Recreativo Sporting LasPalmas Salamanca Getafe Compostela Numancia Albacete Levante Lleida Logrones Leganes Cordoba Murcia Hercules
.(4)
.(5)
.(6)
Real Position
Max Wins
Max Profit
3 3 5 7 8 8 10 10 10 10 11 12 12 13 14 16 16 17 19 19 21 22 23 24 24 27 27 27 28 28 31 34 34 35 35 41
6 5 6 6 9 10 12 10 12 13 8 14 12 12 15 15 18 16 15 16 18 22 23 18 24 30 25 25 25 22 30 31 27 31 25 37
17 15 18 18 21 24 26 24 26 27 21 28 26 25 29 29 32 30 30 30 32 34 35 32 36 38 37 36 37 35 39 39 38 39 37 41
Table 6. Deviations from the profit-maximizing and winmaximizing position. Spanish LFP (unbalanced) English leagues (unbalanced) Variable
N
(pm - p) (wm - p) ((pm - p)^2)/N
189 189 189
((wm – p)^2)/N
189
mean
sum
12.12 -0.48
N
mean
190.62
392 392 392
39.11
392
sum
15.55 -3.61 368.75 140.47
(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
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
-11.75 **
-12.82
0.000
HistoricalStatus
-1.43 **
-2.66
0.009
-1.33 *
-2.18
0.031
RelegationRisk
2.74 **
2.98
0.003
3.18 *
2.55
0.012
AssociativeClub
-0.98
-0.59
0.559
-1.58
-0.88
0.380
ControlConcentr
-0.45
-0.52
0.603
-0.39
-0.38
0.705
DirectorReward
-0.64
-0.74
0.461
-0.07
-0.08
0.939
AtleticBilbao
1.89
0.86
0.393
3.61
1.62
0.108
HomeGrown%
3.53
1.28
0.201
1.42
0.46
0.646
-3.08
0.002
-2.70
0.008
YearsPresident
-0.19 **
-0.26 **
Businessman
2.80 *
1.99
0.048
3.69
1.43
0.156
Constructor
4.49 **
2.76
0.006
7.54 **
2.60
0.011
Economist
-2.52
-0.84
0.402
-3.82
-0.75
0.454
Lawyer
2.69
1.50
0.136
4.37
1.55
0.123
MedicalDoctor
2.47
1.20
0.232
4.74
1.51
0.134
9.14
0.000
5.14
0.000
_cons
14.76 **
R2 No obs. F-statistic
0.59 189 18.2 **
Cook-Weisberg Shapiro-Wilk
13.83 ** 0.22 135 2.69 **
0.791 0.127
0.809 0.030
** 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 2005. 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. 121. DirectorReward dummy for teams which rewarded the members of its board of directors at 30/6/2000. Source: Barajas (2005), Table 4.3, p. 124. (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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Table A1. Profit maximizing and win-maximizing positions in the football leagues. Premier League Average 1993-2004 Manchester United Arsenal Liverpool Chelsea Newcastle United Aston Villa Leeds United TottenhamHotspur West Ham United Southampton Blackburn Rovers Everton Fulham Leicester City Middlesbrough Wimbledon Sunderland Bolton Wanderers Charlton Athletic Coventry City Derby County Manchester City Ipswich Town Sheffield Wednesday Birmingham City Nottingham Forest Crystal Palace Wolverhampton Wander Barnsley Bradford City Sheffield United Norwich City Queen' s Park Rangers West Bromwich Albion Preston North End Watford 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
.(1)
Real Position
2 3 4 6 7 8 8 11 12 13 13 14 14 14 15 15 20 20 20 21 21 22 22 22 22 23 25 27 27 28 29 30 30 30 32 32 32 33 34 34 34 35 35 37 37 38 38 38 38 39 39 40 41 41 42
.(2)
Max Wins
0 0 1 1 0 1 2 6 3 1 8 11 4 2 12 1 10 2 2 17 23 38 7 31 12 22 11 25 6 32 18 20 44 6 5 41 41 28 41 30 21 4 41 34 20 45 45 45 4 42 45 31 45 45 45
.(3)
Max Profit
0 0 5 5 2 6 11 25 16 6 29 32 20 13 33 8 31 14 14 37 40 44 27 43 33 40 32 41 25 43 37 39 45 24 23 44 44 42 45 42 39 18 44 43 39 45 45 45 18 45 45 42 45 45 45
Spanish LFP Average 1994-2005 RealMadrid Barcelona Valencia Celta Deportivo Athletic Valladolid RealSociedad Mallorca Malaga Betis Alaves Espanyol AtMadrid Zaragoza Oviedo Racing Sevilla RayoVallecano Villarreal Tenerife Recreativo Sporting LasPalmas Salamanca Getafe Compostela Numancia Albacete Levante Lleida Logrones Leganes Cordoba Murcia Hercules
.(4)
Real Position
3 3 5 7 8 8 10 10 10 10 11 12 12 13 14 16 16 17 19 19 21 22 23 24 24 27 27 27 28 28 31 34 34 35 35 41
.(5)
Max Wins
2 1 2 3 4 5 9 10 7 8 4 8 8 7 13 12 17 14 19 13 17 22 26 24 28 38 30 27 32 24 37 38 34 35 29 43
.(6)
Max Profit
6 5 7 9 13 15 22 5 19 21 13 21 20 19 27 27 31 29 13 28 31 36 38 16 39 43 40 29 41 37 43 43 33 37 39 44
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Table A2. Deviations from the profit-maximizing and winmaximizing position. English leagues
Spanish LFP Variable (pm - p) (wm - p)
N
mean
36 36 36
((pm - p)^2)/N
sum
N
mean
8.92
55
5.42
-1.26
55
-5.26
36
((wm – p)^2)/N
Sum
96
55
111
18
55
145
(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.
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