The Financial Impact of (Foreign) Private Investors on Team Investments and Profits in Professional Football: Empirical Evidence from the Premier League

Marc Rohde, Christoph Breuer

Abstract


US owners at Manchester United, Arsenal London, and Liverpool; Arab owners at Manchester City; Russian owners at Chelsea London – the top football clubs from England have been acquired by private (mostly foreign) majority investors. Some of these clubs have been claimed to distort national competition, and Manchester City had to pay €60m as a punishment for violating UEFA Financial Fair Play rules in 2014. Thus, this article addresses the controversial financial impact of (foreign) private majority investors in the overinvestment environment of European professional football. Applying property rights theory to an unbalanced panel from the first English division from 2005/06 to 2011/12, this paper tests theoretical predictions from the ‘sugar daddy’ literature and empirically shows that, first, private investors increase team investment and decrease profits. And, second, the positive influence on team investment can mainly be reduced to foreign investors. Implications for utility- and profit-maximizing team owners, managers, and regulators are derived.


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DOI: https://doi.org/10.11114/aef.v3i2.1366

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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