Entry into exit: insolvency in English professional football

Abstract

This study uses a unique database of financial accounts for English football clubs between 1974 and 2010 to examine the process by which firms fail, which in this context means entering insolvency proceedings. From the data it is possible to estimate shocks to demand and productivity and to show that failing firms typically experience a series of negative shocks. This is consistent with the standard IO theory models of exit.

The Inefficient Advantage of Experience in the Market for Football Managers

“…However, in English football it is apparent that the employers themselves are also liquidity constrained. Among the approximately 100 football clubs in our data, there have been 67 instances of legal insolvency proceedings in the last quarter century (see Beech et al (2010) and Szymanski (2017)). Szymanski (2017) showed that insolvency is usually associated with underperformance in the league competition, which in turn can partly be attributed to the ability of the manager.…”

“…However, in the English football industry the threat of insolvency is an important concern (Szymanski, 2015(Szymanski, & 2017. In this section, we present a formal model that shows why we can expect liquidity constrained football clubs to be too eager to hire experienced managers, in a way that lowers the ability of managers active in the industry.…”

“…Insolvency is a relatively frequent event in English football, with an average of two to three legal insolvency events among the hundred clubs every year for the past quarter century (Beech at al, 2010and, Szymanski, 2017. However, the clubs themselves almost always survive, usually being acquired by a local benefactor or a fund raising initiative organized by fans.…”

“…First, conventional financial measures used to predict insolvency in other industries (e.g. profitability and asset/liability ratios) do not discriminate among clubs, since almost all clubs report losses and have weak balance sheets (see Szymanski (2017) for details). Second, the accounting information relating to clubs that effectively become insolvent is often missing, as clubs do not file accounts during insolvency procedures.…”

Attendance in the Canadian Hockey League: The Impact of Winning, Fighting, Uncertainty of Outcome, and Weather on Junior Hockey Attendance

“…In sports, an important component of financial performance of a franchise is attendance. Attendance as a key factor of financial performance has been shown in sports such as soccer in France (Andreff 2018;Scelles et al 2018) and in England (Szymanski 2017). Even in leagues with major television deals, attendance has a significant positive impact on the financial value of sports firms (i.e., Scelles et al 2013cScelles et al , 2016aScelles et al , 2017.…”