Journal of Financial Economics

REF 154 Finance and sports

Sports organizations that hold monopolies (monopsonies) maximize their rent by imposing auctions on their customers (suppliers). The latter suffer from the curse of the auction winner and overpay. This process plays out when: (1) major international sporting events are awarded and candidate cities are encouraged to outbid each other; (2) team owners of North American sports leagues have potential host cities bid for their franchises; (3) TV broadcasting rights are auctioned off among competing networks; (4) acquiring superstar players in the arms race between the richest sports teams.

The recent boom in cryptoassets has targeted the professional sports industry in recent years, notably the NBA, Formula 1 and soccer, both in North America and Europe. Various channels have been developed by digital crypto exchange platforms, such as traditional sponsorship and naming contracts, the issuance of fungible and non-fungible tokens (NFT), and even the payment of athletes' salaries and bonuses in crypto currencies.

Indeed, sport is emerging as a global showcase for crypto players, who are collaborating with North American sports organizations, clubs and franchises to target a young, crypto-receptive customer base.

However, such a boom, which benefited from the crypto market euphoria of 2020-2021, has given rise to a number of dangers, which appeared in 2022, dubbed “the crypto winter”. The bankruptcy of the FTX crypto platform on November 10, 2022, marked a turning point and led to the withdrawal of many crypto platforms from sports.

Since the 1980s, the economic development of professional football has meant that clubs, particularly in Europe, have had to find new sources of financing to cope with inflation in the cost of players. With structurally unprofitable operations, clubs have had to innovate to make themselves more attractive to investors. In the context of building closer ties with finance, clubs are using players, the clubs' main assets, to attract investors. This article examines such practices by characterizing their operating rationale in order to shed light on how professional football players may today be considered as financial products.

The Olympic Movement consists of the majority of sport organisations in the world and receives strong financing from the International Olympic Committee (IOC). The IOC distributes 90% of the revenues generated through the Olympic Games, which makes them the engine of world sports. The Organising Committees of the Olympic Games collect additional funds through their Games, which amounted to 11 billion USD in the last financial period of 2017-2020/21. This article sheds light on the complex financial structures and the distribution of the revenues from the Olympic Games, and provides knowledge needed for every stakeholder seeking better funding from the Olympic system. Even though the revenues have continued to increase until now, most sport organisations need more resources to maintain their autonomy and meet the increasing demands, such as better governance, more solidarity, environmental protection, professionalisation, etc. 

Advocates for the use of public funds to finance the Olympic Games emphasize the need to treat such an allocation of monies as an investment rather than an expenditure in estimating the economic impact. Technically, advocates assert that the economic return from the Olympic Games exceeds zero, meaning no better use of public funds exists. Financial evidence counters such claims and, in fact, supports accounting losses from the Olympic Games. Growing recognition of a negative economic return explains developments relating to waning interest in hosting the Games and the International Olympic Committee's decision to revamp the bidding process for awarding the Games and to award the Summer Games through 2032 to developed countries with substantial sports infrastructure.

Using a panel survey of 26,000 people living in London, Paris and Berlin during the summer months of 2011, 2012 and 2013, we exploit the quasi-natural experience of choosing London as host city. We follow a difference-in-differences approach to determine the effect of hosting the 2012 Summer Olympic Games.

Our results show that the Summer Games increased Londoners' satisfaction and happiness in the short term (i.e. during the Olympic period), particularly around the opening and closing ceremonies. The beneficial effect on Londoners is quite significant, but the monetary equivalent of this gain in terms of subjective well-being remains well below the actual cost of the event. However, the conclusion is different, if we assume that the hedonic effect extends to the whole of the UK and not just to the city of London.

Since it was founded in 1904, the Fédération Internationale de Football Association (FIFA) wanted to organize an “international championship”. However, this project did not immediately come to fruition due to a lack of financial resources and available players. In 1912, the International Olympic Committee (IOC) entrusted FIFA with organizing the Olympic tournament. That competition became one of the most popular events and brought in a third of the Games' total revenue. Its success provoked hostility from IOC officials because many of the football players taking part in the Games did not abide by the rules of amateurism. The conflict enabled FIFA to free itself from IOC control and create its own event. Beginning in 1930, levying 5% from the take of World Cup matches gave FIFA the resources it needed to operate effectively. The financial success of each World Cup became an important criterion for assessing its success.

Speculation about the sale of professional football clubs is a hot news topic and is now competing in the media with the speculation about the transfers of star players. The motivations of the entities that buy these clubs are heterogeneous and have evolved over recent decades. Changes in the legal status of clubs in the five major European championships have made it possible to open-up their capital structure and have opened the door to a certain number of players, each of whom pursues their own specific objectives: companies, billionaires, foreign states or affiliated entities, investment funds, etc. The motivations of these owners can be very different, leading in some cases to seeking to maximize the number of victories and in others to maximize financial profits. We identify the specific characteristics of each type of owner.

In football, multi-club ownership (MCO) involves individual owners, groups or clubs. It's a fairly recent phenomenon that dates back to the late 1990s, but one that seems to be gaining ground in football today.

Economically, this development of MCOs is in line with the logic of mergers and acquisitions of enterprises, a common practice in a market economy. Mergers and acquisitions can be “horizontal” (buying clubs at the same level), “vertical” (buying training clubs), or aimed at “expanding the market” (buying clubs from other regions).

From a sporting point of view, this practice poses obvious problems of conflict of interest, if two teams from an MCO play each other in the same competition. The UEFA has (for now) solved this issue of sporting ethics through the Red Bull jurisprudence, based on its concept of “decisive influence” of one club over another.

This study intends to inform whether UEFA (Union of European Football Associations) Financial Fair Play (FFP) is “fair”. More specifically, it examines whether Real Madrid built its past successes in the men's Champions League “unfairly” (as per FFP requirements) as a platform for its current “fair” revenue and wins. The methods employed are documentary search and calculation of the percentage of revenue derived from earlier “unfair” wins to assess whether they contributed to recent wins. Results suggest that Real Madrid's initial wins in the Champions League would have complied with FFP requirements, but not its three wins over the period 1998-2002, meaning that the club currently generates revenue considered as “fair” from past “unfair” wins. However, this additional revenue does not seem to have acted as a platform for recent successes. Therefore, FFP might be “fair”. Extending the analysis to more clubs is needed to investigate this further.

This article analyzes how financial regulation systems in professional football set up by the National Directorate of Management Control in France and in Europe by the UEFA are changing. These systems, historically different in how they regulate activity, have recently been overhauled. In 2022, the replacement of Financial Fair Play by a UEFA financial viability system seems to align European regulation more closely with the French system. By analyzing the changes in the two sets of regulations, we show how both bodies are converging towards setting up flexible budget requirements for clubs playing in the European and French leagues, while aiming to ensure the clubs are financially viable. In addition, for the first time, these regulations explicitly introduce total team salary cap requirements similar to the North American leagues. The simulation of the impact of this rule in the 2021-2022 season for a group of French clubs shows that differences persist.

The third tier of French football is a “mixed” league in which clubs that temporarily retain professional status play alongside clubs that are supposed to be amateur and that employ people whose profession is to play football. We analyse the extent to which this duality is the source of distortions between clubs, distortions that are prejudicial to fairness and to the attractiveness of sporting events.

The paper presents an overview of changes in the financial situation of the National Hockey League over the last 30 years, notably by comparing it with that of the other three major sports in North America. The changes in this financial situation can be explained in large part through the four major industrial conflicts between the owners and the players that have occurred over the last 30 years – one strike and three lockouts. These conflicts have arisen around the rules regulating access to the status of free agent as they appear in the collective bargaining agreement that binds the National Hockey League Players' Association (NHLPA) and the owners, represented by the league's commissioner. The agreement also deals with the revenue split between players and owners, as well as other clauses that have financial consequences, such as the minimum salary and salary arbitration.

Although cycling races are won by individuals, race organizers invite teams, not individual riders, to their events. Consequently, professional cyclists need to be part of cycling teams to secure access to the races they are interested in. This chapter focuses on the finances of the cycling teams. We first demonstrate how budgets of professional road cycling teams have increased substantially over the past twenty years. Then we discuss in detail cycling team costs (e.g. rider salaries, logistics) and sources of revenue (e.g. sponsorship, prize money).

Between June 2022 and June 2023, two gold leagues, one open (PGA Tour) and the other closed (LIV Golf) – which have now merged (merger on 6 June 2023) – coexisted on a world level. The purpose of this article is to analyze this situation and the resulting perspectives. The comparison focuses on three of the economic cornerstones of these two leagues. First, their historical origins: organization and participants. Secondly, economic and financial aspects: financing and remuneration of the operators. Finally, the business models that were chosen and therefore the conditions under which value was created, transmitted and then “captured” in return in both leagues. The final section presents the terms of the agreement that led to the merger, and looks at the future prospects for professional golf.

From the point of view of its economic model, the case of tennis is fairly original for several reasons presented in this article. First, the major tournaments play a central role in financing the International Tennis Federation (ITF), and particularly in financing certain national federations such as the French Tennis Federation (FFT). French tennis authorities have been able to keep their major tournaments under their control, and are reaping the benefits. These funds help the regional leagues and departmental committees, which are in a very healthy financial position. On the other hand, the clubs often find themselves in much more precarious situations. With the exception of the most prestigious tournaments, such as those of the Grand Slam, the ATP 1000 and the few ATP 500, professional tournaments get only a small part of their revenues from TV rights and ticketing (stadiums are fairly empty most of the time). Their economic model is based mainly on public relations and partnerships.

This article analyzes the impact of working capital requirement (WCR) management on profitability in the context of the Covid-19 crisis.

The study examines the performance of 24 CAC 40 companies from 2017 to 2021. Profitability is measured by two indicators – return on equity (ROE) and return on assets (ROA). The cash conversion cycle is used to analyze WCR. We used Kendal's coefficient to study the correlations between the different variables.

Our results confirm that there is a significant correlation between working capital and profitability. However, this relationship changed during the Covid-19 crisis. The impact of customer payment delays on profitability increased. The study concludes that WCR management can be a factor of resilience in times of crisis.