Earnings Persistence of European Football Clubs under UEFA’s FFP

Dimitropoulos, Panagiotis; Koronios, Konstantinos

doi:10.3390/ijfs6020043

Cited by 17 publications

(16 citation statements)

References 25 publications

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“…For example, earnings persistence in Korean companies during the period of 1995-2006 was lower compared to the developed countries . Dimitropoulos and Koronios (2018) indicated that current cash flows had more predictive ability of future earnings than current earnings for 109 European top-tier clubs during the period of 2008-2016. Senan (2019) found that current cash flows from operations had more predictive ability compared to current earnings for the Saudi companies during the period of 2006-2015, and he also found that accruals increased the predictive ability of current earnings.…”

Section: Literature Reviewmentioning

confidence: 99%

Persistence and Predictive Ability of Earnings: Evidence from France and the UK

Kimouche

2021

Economics and Business

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The persistence and predictive ability are extensively requested as desirable attributes of earnings quality in the literature. The paper aims at investigating the persistence and predictive ability of earnings in French and UK companies. The study included a panel data of 1035 firm-year observations for 115 French listed companies from the CAC All-Tradable and 900 firm-year observations for 100 UK listed companies from the FTSE All-Share, during the period of 2011–2019. The research design was based on two equations starting from Sloan (1996) that were estimated using Fixed Effects Method. The study showed that earnings were persistent but they had no predictive ability regarding the future cash flows whether in French or UK companies and that earnings of UK companies were more persistent than those of the French companies. We argue that the persistence of earnings and the inability to predict future cash flows can be evidence of earnings management. The study contributes to the literature about earnings quality by studying earnings persistence and earnings predictive ability together in two different environments. The results require that users must take into consideration the illusory persistence of earnings, auditors must be cautious regarding the manipulation of earnings by managers, and accounting standard setters must review the reporting guidelines of cash flows to enhance their predictability by earnings.

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Section: Literature Reviewmentioning

confidence: 99%

Persistence and Predictive Ability of Earnings: Evidence from France and the UK

Kimouche

2021

Economics and Business

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“…The financial principles of the FFP are not far from the common logic of financial sustainability, being: (a) the debt must be maintained at manageable levels and paid on time; and (b) expenses must be kept within the parameters of each club's ability to pay based on their income (Cordery, Sim & Baskerville, 2013). Dimitropoulos and Koronios (2018) complement previous authors by describing that UEFA has introduced sustainability as the most important financial feature of the new licensing regulation, as clubs need to prove that they will honor their debt obligations (without late payments).…”

Section: Installment Of Debts Of Football Clubsmentioning

confidence: 99%

PROFUT: an analysis of the capital structure of Brazilian soccer teams

Rocha

Oliveira²,

Valdevino

2021

AMBIENTE

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Purpose: The research intends to verify the relationship between meeting the requirements for joining and staying at PROFUT and the economic and financial situation of Brazilian football clubs listed in the Ranking Nacional de Clubes (RNC). Methodology: The study was operationalized by the deductive method, taking an empirical approach, using the analysis of individuals, facts and consequences researched. As for the procedures adopted, the research is classified as a bibliographic and documentary review and a quantitative approach. The matter was addressed through the application of an investigation of the points of the legislation, through a checklist, and the presentation of economic and financial indicators: indebtedness, current liquidity, tangibility, size and return of net worth. Results: Given the investigation carried out, it was noticed that, even with the current requirements of the legislation and criteria of enforceability for participation in PROFUT, adherence to the program does not guarantee a better economic and financial situation, mainly related to the factors inherent to the capital structure. Contributions of the Study: The paper contributes in a theoretical way in the production of a contextualized analysis of the main existing researches and shows new explanations of the studied fact based on different perspectives. With regard to the practical contribution, based on the main findings found, and seeking to relate the level of commitment of the analyzed clubs, which adhered to PROFUT, with the management of their capital structure, it was noticed the absence of a direct relationship between adherence to this type of financing and the management of the sources of capital obtained.

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“…Mais la plupart des travaux restent centrés sur le seul impact financier du FPF. Ainsi, un numéro spécial sur le financement du sport dans l'International Journal of Financial Studies s'est concentré sur l'impact du FPF sur une série d'éléments financiers tels que les flux de trésorerie et les bénéfices ainsi que les frais d'audit (Dimitropoulos et Koronios, 2018 ;Mareque et al, 2018). Franck (2018) a également proposé des explications plausibles au redressement financier observé dans le football européen de première division, tout en appelant à une évaluation de l'efficacité réelle du dispositif, après cinq années d'application de la règle de l'équilibre financier.…”

Section: Revue De Littératureunclassified

Analyzing the effectiveness of UEFA's financial fair play regulations: A comparative study of the French Ligue 1 and the English Premier League

Avril¹,

Dermit-Richard²,

Plumley

et al. 2021

Management Et Organisations Du Sport

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This article assesses the effectiveness of the UEFA Financial Fair Play (FFP) regulations, one of the few financial regulatory tools for open leagues in Europe in two top divisions in Europe. The objective of FFP borrows from the theoretical concept of ‘soft budget constraint’ in sport finance and regulation literature. Introduced by UEFA in 2011 and fully implemented from 2013, FFP requires clubs qualifying for European competitions to comply with the financial concept of “break-even”, where football expenses should not exceed football revenues. This study uses the French Ligue 1 (L1) and the English Premier League (PL) as a case study for analysing the effectiveness of FFP and includes thirteen clubs (seven French and six English) in total. The selection of clubs was guided firstly by data access but was also restricted to clubs regularly participating in European competitions between 2011, when FFP came into effect, and 2018. The scope of the study enabled us to measure the effect of FFP with regard to the break-even rule and the payroll ratios before and after its full application by comparing the periods 2008-2013 and 2013-2018 using descriptive statistics and tests of comparisons. The results are contrasted according to the national context of the clubs studied and the indicators analysed. First, they show a general improvement in the profitability of the clubs in the sample, although the results are statistically significant only in the case of the PL. Concerning the payroll ratios, the first measure (payroll/operating expenses) decreased significantly for all clubs, with significant differences found comparatively in the case of the L1. The second measure (payroll/operating income) also decreased, but the decrease was only significant at the sample level when the trading activity was included in operating income. From a theoretical perspective, this contribution makes it possible to compare the conclusions obtained with existing works, be it predictive or empirical in nature. From a managerial point of view, it calls for UEFA to remain vigilant in respect of FFP. While the results appear to suggest that FFP has been effective in improving the financial equilibrium of clubs and their payroll ratios, the link between better financial health and good governance remains a key challenge for the industry moving forward. Cet article ambitionne d’évaluer l’efficacité du système de Fair-play financier (FPF), un des rares outils de régulation des ligues ouvertes en Europe. Elle s’inscrit dans le cadre de la régulation financière des ligues de sports collectifs en empruntant des éléments théoriques au concept de « contrainte budgétaire lâche ». Instauré par l’UEFA en 2011 et pleinement appliqué à partir de 2013, le FPF impose aux clubs qualifiés en coupes d’Europe de respecter une règle d’équilibre financier limitant leurs montants de dépenses issues de l’activité football à ceux de leurs recettes, sans l’aide d’apports extérieurs. Pour parvenir à cet objectif, nous avons retenu sept clubs évoluant en Ligue 1 française (L1) et six en Premier League anglaise (PL). Cette sélection a d’abord été guidée par l’accès aux données et a été restreinte aux clubs participant régulièrement aux compétitions européennes entre 2011, année d’entrée en vigueur du FPF, et 2018. Le périmètre ainsi constitué nous a permis de mesurer l’effet du FPF au regard de la règle d’équilibre et des ratios de masse salariale avant et après sa pleine application en comparant les périodes 2008-2013 et 2013-2018 à partir de statistiques descriptives et de tests de comparaisons. Les résultats sont contrastés en fonction du contexte national des clubs étudiés et des indicateurs analysés. Ils montrent d’abord une amélioration générale de la profitabilité des clubs sur l’ensemble de l’échantillon même si, au niveau national, les résultats ne sont statistiquement significatifs que dans le cas de la PL. Concernant les ratios de masse salariale, le premier étudié (masse salariale/charges d’exploitation) a diminué de façon significative sur l’ensemble des clubs même si la significativité des tests de comparaison n’a été constatée, cette fois-ci, que dans le cas de la L1. Le second (masse salariale/revenus d’exploitation) a également diminué mais la baisse n’est significative à l’échelle de l’échantillon que lorsque l’activité de transfert est intégrée aux revenus d’exploitation. D’un point de vue théorique, cette contribution permet de confronter les conclusions obtenues aux travaux existants qu’ils soient de nature prédictive ou empirique. D’un point de vue managérial, elle invite l’UEFA à rester vigilante car, si les résultats sont plutôt flatteurs laissant à penser que le FPF a été efficace dans l’amélioration de l’équilibre financier des clubs et de leurs ratios de masse salariale, le lien entre meilleure santé financière et bonne gouvernance est toutefois interrogé en fin d’article.

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Earnings Persistence of European Football Clubs under UEFA’s FFP

Cited by 17 publications

References 25 publications

Persistence and Predictive Ability of Earnings: Evidence from France and the UK

Persistence and Predictive Ability of Earnings: Evidence from France and the UK

PROFUT: an analysis of the capital structure of Brazilian soccer teams

Analyzing the effectiveness of UEFA's financial fair play regulations: A comparative study of the French Ligue 1 and the English Premier League

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