European Sport Management Quarterly

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The market for football club investors: a review of

theory and empirical evidence from professional
European football

Marc Rohde & Christoph Breuer

To cite this article: Marc Rohde & Christoph Breuer (2017) The market for football club investors:
a review of theory and empirical evidence from professional European football, European Sport
Management Quarterly, 17:3, 265-289, DOI: 10.1080/16184742.2017.1279203

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EUROPEAN SPORT MANAGEMENT QUARTERLY, 2017
VOL. 17, NO. 3, 265–289
http://dx.doi.org/10.1080/16184742.2017.1279203

The market for football club investors: a review of theory and

empirical evidence from professional European football
Marc Rohde and Christoph Breuer
Institute of Sport Economics and Sport Management, German Sport University Cologne, Köln, Germany

ABSTRACT ARTICLE HISTORY

Research objectives: The European market for football club Received 21 September 2015
investors is undergoing a significant transformation, with German Accepted 5 December 2016
clubs opening up for strategic investors, French clubs being taken
KEYWORDS
over by private majority investors, and English top-league clubs Sports economics; club
experiencing an influx of foreign investors. Economic and legal ownership; incorporation;
politics have played an important role in the deregulation of commercialization;
closed member associations. internationalization; majority
Research methods: This paper aims to summarize the history and investors; foreign investors;
market situation of the ‘Big Five’ European leagues, review Europe
available theory and empirical evidence on incorporations and
public and private investors, and suggest research gaps that JEL CLASSIFICATION
D2; D4; D92; L1; L2; L83
deserve further attention. The authors have also constructed a
unique database covering all owners in the two premium
divisions in England, France, Germany, and Italy for the period
from 2003 to 2014.
Results and findings: The available articles in the growing research
field of football club investors cover various theoretical areas, such
as the application of property rights theory to European football
clubs. In addition, several empirical papers analyze the financial
and sporting impact of domestic and foreign private investors and
public listings. All these studies highlight the increasing
importance of club ownership in the rat race of European football.
Implications: Nevertheless, some research gaps remain to be
studied at an appropriate depth. First, further empirical studies
should analyze the impact of incorporations in German football
and the entry of private majority investors in France. Furthermore,
future research may address the paradox of de-listings in England
and additional listings in continental Europe. Finally, this article
identifies the impact of foreign investors and multi-ownership
synergies as promising research fields. In this respect, the article
provides some managerial implications for football club owners,
managers, and regulators.

Introduction
The market for investors in European football clubs is characterized by low entry barriers,
weak profitability despite escalating revenues, and considerable diversity of owner types,
objectives, and origins. In contrast to the major sports leagues in the US, there is no arti-
ficial limitation of licenses; however, investors can generally take over lower-class teams

CONTACT Marc Rohde [email protected]

© 2017 European Association for Sport Management
266 M. ROHDE AND C. BREUER

and develop them through promotions into top-class teams (Buraimo, Forrest, &
Simmons, 2007). European football is nevertheless also characterized by low profitability;
for example, the English Premier League and the German Bundesliga were the only ‘Big
Five’ leagues that were able to generate an operating profit in 2013/2014 (Deloitte,
2015). Compared to other European sports, football is characterized by high national
attendance and TV viewership (Buraimo & Simmons, 2009). On the one hand, Deloitte’s
Annual Review of Football Finance reveals that the revenues of the ‘Big Five’ leagues have
grown by an average rate of 7.0% p.a., from €6.2 mn in 2004/2005 to €11.3 mn in 2013/
2014, mostly owing to increasing national and international TV viewership and commer-
cial revenues. On the other hand, wage costs have grown even more, at an average rate of
7.1% p.a. to €6.8 mn in 2013/2014. However, because of the introduction of the Union of
European Football Association’s (UEFA) Financial Fair Play (FFP) rules, bottom-line club
losses have been reduced from €1.7 bn in 2011 to €0.5 bn in 2014 (UEFA, 2015). Similar to
regulations in major US sports leagues, multi-club ownership is generally allowed,
although investors are not allowed to participate with more than one team simultaneously
at UEFA club competitions (UEFA, 2016, p. 15). Moreover, the market for European foot-
ball club ownership is very diverse. For example, teams may be owned by its members,
regional or national businessmen, industrial companies, sports investment firms, other
football clubs, or foreign investors. While English football clubs may be utility or profit
maximizers, most researchers agree that continental European football clubs are closest
to win maximizers (Garcia-del-Barrio & Szymanski, 2009; Késenne, 2000). In fact, most
football clubs may implicitly follow a set of several financial and sporting objectives,
and recent research has suggested that experimental models should be used to measure
the holistic performance of football clubs (Plumley, Wilson, & Ramchandani, 2017).
Since the beginning of the twenty-first century, we have witnessed the increasing
importance of club ownership owing to changing economic incentives, the increasing
prevalence and financial leverage of private investors, and the increasingly important
role of private investors from a sporting perspective (Plumley et al., 2017; Wilson,
Plumley, & Ramchandani, 2013). Because European football clubs typically follow finan-
cial and/or sporting objectives such as profit or win maximization (Garcia-del-Barrio &
Szymanski, 2009), academic scholars have established a growing research stream studying
the impact of club ownership and governance systems on the financial and sporting per-
formance of football clubs. Additionally, club managers, owners, and regulators are inter-
ested in understanding the implications of football club investments. While early studies
provide a comprehensive perspective on the different types of ownership and governance
models in the major European football markets (Morrow, 2003; Walters & Hamil, 2010), a
comprehensive review of the financial and sporting implications of each of these models is
lacking. Thus, this paper reviews existing literature studying the impact of managerial
decisions related to club ownership and governance systems on the financial and sporting
performance of football clubs. Scholars should be interested in the remaining research
gaps that are noted in this review paper, and club managers and owners will benefit
from the summary of the historic developments and the status-quo of club ownership
in key European leagues and will receive guidance in their choice of ownership model.
Specifically, this paper will help owners and managers avoid ‘instinctive’ decisions
based on ‘one-sided’ considerations. It provides a holistic perspective and summarizes
various financial and sporting consequences of ownership and governance models.
 EUROPEAN SPORT MANAGEMENT QUARTERLY 267

Regulators may be interested in this study’s trans-national perspective on the financial

leverage and sporting impact of private investors. Indeed, regulations such as the UEFA
FFP and the German 50 + 1 rule are evaluated based on insights from recent studies,
and regulators may choose to adjust their ruleset if the current outcomes are considered
detrimental.

Changing economic incentives

European professional football is characterized by an overinvestment environment in
which teams increasingly compete based on their spending power (Dietl, Franck, &
Lang, 2008). The growing prize money of the UEFA Champions League, the escalating
TV revenues for premium competitions, and the internationalization of marketing
measures have strengthened the incentives to compete among Europe’s leading clubs.
Across all the major European leagues, player salaries and transfer fees have outgrown rev-
enues. Consequently, top clubs increasingly require large financial resources to remain
competitive (Baroncelli & Lago, 2006), and such revenues are often provided by share-
holders acting as non-profit-seeking investors or patrons (Andreff, 2007).

Relevance of club ownership from a financial perspective

The importance of (foreign) majority investors in European football is highlighted by the
prevalence and value share of investor-owned clubs in the first two divisions.1 As of June
2012, approximately three of four professional clubs were majority owned by private
investors, and one in six clubs were owned by foreign investors. Considering value
shares, private majority investors accounted for 75% of the revenues generated, approxi-
mately 80% of the market values and wages, and 90% of the transfer expenses paid in 2011/
2012. Considering only foreign private majority investors, these investors accounted for
approximately 30% of revenues, market values, and wages and more than 40% of transfer
expenses.2 Given these figures, there is no doubt that (foreign) private investors have
arrived in European football.
A club-level analysis reveals the financial leverage of investor-owned clubs compared
with member-owned clubs or clubs with distributed ownership. In the 2011/2012
season, clubs owned by private investors generated greater revenues (+4%), had higher
team market values (+12%), paid higher wages (+11%), and paid higher transfer expenses
(+25%) than the average club in Europe’s first two divisions. Further, foreign investors
generated even higher premiums with respect to revenues (+67%), market values
(+74%), wages (+79%), and transfer expenses (+138%).3
Plumley et al. (2017) determine an aggregate financial performance score based on turn-
over increase, profit increase, profit, ROCE, current ratio, debt, gearing ratio, and wages as a
share of turnover. An analysis of the performance of English Premier League clubs against
this aggregate measure in 2010 indicates that four of the top five performing clubs were
owned by US investors (Arsenal, Manchester United, Aston Villa, Blackburn), while two
of the three lowest performing clubs were owned by English investors (Bolton, Wigan).
268 M. ROHDE AND C. BREUER

Relevance of club ownership from a sporting perspective

Club ownership has also become increasingly important from a sporting perspective. For
clubs such as Chelsea FC (2005, 2006, 2010), Manchester City (2012, 2014), and Paris
Saint-Germain (2013-2016), new wealthy owners have led the club to repeated national
championships within a few years of taking over. Wilson et al. (2013) report that
English Premier League clubs owned by foreign private investors perform better in the
national league than clubs owned by domestic private investors. Plumley et al. (2017)
measure sporting success through a holistic score accounting for win ratio, league
points, and stadium capacity utilization. Applying this measure to English Premier
League clubs, they show that four of the top five performing teams in the 2010 season
were owned by foreign private investors (Manchester United, Chelsea, Arsenal, Manche-
ster City) and that one club (Tottenham) was owned by an English investment company.
In contrast, two of the three lowest performing teams were majority owned by domestic
owners (Bolton, Wigan), while Westham United experienced a change in ownership from
Icelandic to Welsh investors. In addition to short-term sporting success, private investors
also tend to play a dominant role in long-term investments, such as the establishment of
major new training and youth center facilities and the integration of leading youth players
into the first squad. According to Transfermarkt.de, in May 2016, the most valuable youth
players below the age of 23 years and valued at more than €20 mn were all playing for
clubs owned by majority investors.4 Additionally, investor-owned clubs successfully
attracted some of the most successful and sought after managers. For example, Pep Guar-
diola left Bayern Munich at the end of the 2015/2016 season, as he had signed a three-year
deal with Manchester City. Similarly, former Borussia Dortmund coach Jürgen Klopp
signed a deal with Liverpool FC one year earlier. According to France Football, eight of
the top ten club managers in 2016 were employed by investor-owned clubs; the two excep-
tions were Real Madrid and FC Barcelona.

Development and status of club ownership

Since the early days of European football in the nineteenth century, professional football
has been deregulated and undergone three core trends: professionalization, commerciali-
zation, and internationalization. The first phase has been characterized by a professiona-
lization of football clubs linked to the legal unbundling of football clubs from member
associations. That is, clubs are founding separate legal entities to accommodate the pro-
fessional football teams or are converting the member association directly into a corpor-
ation. While English clubs converted into joint stock companies as early as the late
nineteenth century (Leach & Szymanski, 2015), Italian and French clubs incorporated
in the second half of the twentieth century. The German market was the last of the
major leagues to allow legal unbundling in 1998 (Dietl & Franck, 2007), and member
associations in professional football still existed in early 2016 (e.g. FC Schalke 04, VfB
Stuttgart). The second phase has been characterized by the entry of private majority inves-
tors. Legal unbundling is a pre-condition for the entry of external owners, but the owner-
ship structure remains unchanged. In contrast, the second phase can be characterized as
ownership unbundling, as private investors have acquired majority shares in football com-
panies. While the German ‘50 + 1 rule’ limits the influence of private investors to minority
 EUROPEAN SPORT MANAGEMENT QUARTERLY 269

control, clubs in the other major European football leagues can be fully taken over by
private investors (Franck, 2010b). Some of the first companies involved in football were
industrial companies, such as Royal Arsenal (1886), Parmalat (1913), and Peugeot
(1928), which founded company teams and later became the principal team owners
when the clubs opened up to outside players. After the national deregulations, additional
investors entered the market, including local and national businessmen, sports investment
companies (e.g. Sisu in 2007), family dynasties (e.g. Berlusconi family in 1986), and non-
traditional investors (e.g. ENIC until 2004, Inter Milan in 2002). The final stage has been
characterized by the entry of foreign investors. Historically, England opened up the earliest
in the 1990s (Hoehn & Szymanski, 1999), and by the end of the 2013/2014 season, there
were a multitude of foreign investors from the US (e.g. Stan Kroenke), Southeast Asia (e.g.
Vincent Tan), the Middle East (e.g. the Al-Hasawi family), and other regions. In France,
Grenoble was the first foreign investor-owned club with the entry of Inditex in 2005. In
Italy and Germany, foreign investors remain a very new phenomenon. In Italy, Thomas
Di Benedetto’s takeover of AS Roma in 2010/2011 was the first takeover of an Italian pro-
fessional football club by a foreign investor (A.S. Roma S.P.A., 2011, p. 13). This takeover
was followed by the majority acquisition of Inter Milan by Erick Thohir’s International
Sports Capital in October 2013. Similarly, Hasan Ismaik was the first foreign majority
owner of a professional German football club after the acquisition of 1860 Munich in
2011/2012 (Sambidge, 2011). Since the beginning of the 2014/2015 season, Red Bull has
been the owner of RB Leipzig, which was promoted to the second division and able to
incorporate its professional team at the end of the 2013/2014 season. Most recently, the
UEFA introduced the ‘FFP’ restrictions, which took full effect in the 2013/2014 season
and apply to all clubs playing in UEFA competitions (Peeters & Szymanski, 2014).
These regulations require that clubs pay their bills, balance their spending with their rev-
enues, and refrain from accumulating debt.
The contemporary European market for football club investors offers the opportunity
to analyze clubs and leagues along all three phases (Figure 1). In Germany, about half of
the first and second division clubs had incorporated by the end of the 2013/2014 season,
while the remaining clubs remained registered as member associations. In France,
approximately 75% of the clubs were controlled by private majority investors, while
some clubs remained controlled by their members. In England, more than half of the
clubs in the first two divisions were already owned by foreign majority investors in the
2013/2014 season. All three markets have been subject to considerable development.
Thus, sports economists are able to analyze the financial and sporting impact of
incorporation (‘professionalization’), the entry of private majority investors (‘commercia-
lization’), and the entry of foreign investors (‘internationalization’) in three key European
leagues.

Club ownership and financial and sporting performance

As of early 2016, there has been limited research on the financial and sporting impact of
club investors in European football. Some key reasons for this phenomenon are as follows:

. Until recently, the data availability and transparency of football club ownership have
been limited. The French football regulator Direction Nationale du Contrôle de
270 M. ROHDE AND C. BREUER

Figure 1. Distribution of European football clubs by type of investor.

Notes: 1st and 2nd division clubs as of 06/2014.

Gestion (DNCG), a directorate of the Ligue de Football Professional (LFP), started to

publish the share of clubs owned by private investors in the early 2000s. In 2009,
English newspaper The Guardian began to report club ownership in English pro-
fessional football and published shareholders and stakes for all Premier League clubs.
. Additionally, the availability of profit and loss data and club and player values has been
limited. For approximately a decade, Deloitte has regularly published financial infor-
mation for the top two English divisions in its Annual Review of Football Finance,
and LFP has done so for the first two French divisions. Spanish and Italian club data
can be purchased from company registers, while German member associations are
not required to publish any financial data. The market and transfer values of European
football teams can be sourced from a reliable database (http://www.transfermarkt.de).
. The European football market is special because of the peculiar co-existence of non-
profit member associations and commercial corporations. In Germany and France,
member associations may still control professional football clubs, while other clubs
are owned by private investors. Both types of companies compete with each other in
the same arena, thus enabling comparisons of financial efficiency and sporting success.
. European football is characterized by the different objective functions of foreign and
domestic owners. For example, US investors are generally considered to be profit maxi-
mizers, while continental European owners are typically utility or win maximizers.
. Finally, the UEFA as the regulator of European professional football has only recently
identified the distorting impact of (foreign) private investors on the competitive balance
in European football. While not stated as an official objective, few researchers would
doubt that the FFP regulation that took full effect in the 2013/2014 season aimed to
limit ‘overinvestments’ by wealthy owners.
 EUROPEAN SPORT MANAGEMENT QUARTERLY 271

The newly available detailed information on club ownership in European professional

football, the importance of governance structures, and the recent introduction of UEFA’s
FFP regulations for the state of play in European football demand a thorough analysis of
the impact of football club investors. The structure of this article follows the seminal work
of Frick (2007), who studies the status of the labor market for football players. This article
adapts this structure to the market for football club investors. In particular, the paper ana-
lyzes three key phases in the liberalization of football club ownership: incorporations,
private (and public) investors, and foreign private investors. For each of these three
phases, this review paper provides a short introduction, key descriptive findings, a litera-
ture review of the relevant theoretical insights and empirical studies, and a critical evalu-
ation of the available literature and potential research gaps. Then, the article summarizes
the benefits and weaknesses of the literature and suggests areas for further research.
Finally, the article provides some managerial implications for football club owners, man-
agers, and regulators.

The market for football club investors

Incorporations
Generally, there are three types of legal forms in European professional football: member
associations, private limited companies, and publicly listed corporations (Franck, 2010).
Member associations are the original club form in which members own the club. In
Germany, many professional football clubs remains registered as member association,
including leading traditional clubs such as Schalke 04 and VfB Stuttgart, while the
Spanish regulator has allowed only four clubs (Real Madrid, FC Barcelona, Osasuna, Ath-
letic Bilbao) to remain member associations to reduce the excessive debt of Spanish clubs
in 1990 (García & Rodríguez, 2003). In England, the majority of clubs had converted into
joint stock companies as early as the late nineteenth century (Leach & Szymanski, 2015).
The Italian regulator allowed clubs to transform into corporations voluntarily after 1966,
before it required them to do so in 1981. In France, clubs have also been required to
convert into private companies or publicly listed corporations; however, some French
member associations still own a majority share in their clubs (Gouguet & Primault, 2006).
The German football association was the last of the ‘Big Five’ leagues to allow the legal
unbundling of clubs in 1998 (Franck, 2010b). Figure 2 summarizes the cumulative

Figure 2. Cumulative incorporations of first and second division clubs in Germany since 1998. Sources:
German company register; Club homepages.
Note: No incorporations prior to 1998; balanced panel based on 1st and 2nd division clubs as of 06/2014.
272 M. ROHDE AND C. BREUER

incorporations of the first and second division Bundesliga clubs since 1998. Bayer Lever-
kusen and Hannover 96 were the first Bundesliga teams to spin off their professional foot-
ball teams in 1999. By 2006, two-thirds of Bundesliga teams had incorporated. In 2014,
HSV Hamburg was the next candidate to incorporate, while VfB Stuttgart plans the incor-
poration of its professional football team in 2016. Interestingly, second division teams
have started to incorporate significantly later. By 2009, only five second division clubs
had spun off their teams, and no other team has done so since.
Based on club accounts and the German company register, we determined that as of
December 2014, approximately 50% of the first and second division clubs had converted
into corporations and that only five clubs in the first division and 13 clubs in the second
division remained as registered member associations (Table 1). On the one hand, as com-
mercial entities, private limited companies (GmbH, GmbH & Co KG, etc.) and publicly
listed corporations (AG) are considered to be more suitable to lead professional football
clubs because they have annual revenues of such high magnitude. On the other hand,
incorporation is a pre-requisite for the entry of private investors. Thus, some clubs
have allowed the entry of private investors shortly after incorporation (e.g. Bayern
Munich, Borussia Dortmund, Hamburger SV), while other clubs have remained fully
owned by member associations thus far (e.g. 1. FC Köln, Werder Bremen). Except for
Schalke 04, all the German clubs participating in the 2014/2015 UEFA Champions
League (Bayer 04 Leverkusen, Bayern Munich, Borussia Dortmund) were among the
first to incorporate between 1999 and 2001. Nevertheless, incorporation has been by no
means a guarantee of success. For example, traditional clubs such as Alemannia
Aachen, MSV Duisburg, Offenbacher Kickers, and VfL Osnabrück experienced financial

Table 1. Legal forms of first and second division Bundesliga clubs.

1. Bundesliga 2. Bundesliga
Year of Year of
Club Legal form incorporation Club Legal form incorporation
Bayer 04 Leverkusen GmbH 1999 1860 München GmbH & Co. 2002
KGaA
Hannover 96 GmbH & Co. 1999 Greuther Fürth GmbH & Co. 2003
KGaA KGaA
Eintracht Frankfurt AG 2000 FC Ingolstadt GmbH 2004
Borussia Dortmund GmbH & Co. 2001 Eintracht GmbH & Co. 2008
KGaA Braunschweig KGaA
Bayern München AG 2001 FSV Frankfurt GmbH 2009
Hertha BSC Berlin GmbH & Co KGaA 2001 1. FC Heidenheim e.V. n/a
VfL Wolfsburg GmbH 2001 1. FC Kaiserslautern e.V. n/a
1. FC Köln GmbH & Co. 2002 1. FC Nürnberg e.V. n/a
KGaA
SV Werder Bremen GmbH & Co. 2003 Erzgebirge Aue e.V. n/a
KGaA
Borussia M’Gladbach GmbH 2004 FC St. Pauli e.V. n/a
TSG 1899 Hoffenheim GmbH 2005 Fortuna Düsseldorf e.V. n/a
FC Augsburg GmbH & Co KGaA 2006 Karlsruher SC e.V. n/a
Hamburger SV AG 2014 RB Leipzig e.V. n/a
Mainz 05 e.V. n/a SV Darmstadt 98 e.V. n/a
FC Schalke 04 e.V. n/a SV Sandhausen e.V. n/a
SC Freiburg e.V. n/a Union Berlin e.V. n/a
VfB Stuttgart e.V. n/a VfL Bochum e.V. n/a
SC Paderborn e.V. n/a VfR Aalen e.V. n/a
Note: Legal form as of December 2014.
Sources: Bundesanzeiger; Club homepages; Author research.
Table 2. Literature review: the financial impact of member associations on football clubs and sports institutions.
Author(s) and year of Theoretical vs. Dependent variable/ Hypothesized impact/
publication empirical paper Applied theories Data/scope estimation technique significant findings
Fritz (2006) Empirical Market-based view, resource- German Bundesliga clubs (1997/1998–2002/2003) Relative net revenues Incorporation (no effect)
based view, efficiency analysis
Franck and Dietl Theoretical Property rights theory German professional football Economic value creation Member association (+)
(2007) Profitability Investor (+)
Dilger (2009) Theoretical Capital market theory Professional team sport Risk-adjusted return Member associations (+)
Smith (2009) Empirical Property rights theory Swedish riding schools (n = 60 non-profit schools Strategy/structure fit Non-profit organizations
and n = 11 private reading schools) No strategy/structure fit Private organizations
Franck (2010a) Theoretical Firm theory, overinvestment, European football Channeling of funds into team Member association (+),
property rights theory (vs. extraction of profits) public corporation (−)
Access to private funds (i.e. Member association (−),

EUROPEAN SPORT MANAGEMENT QUARTERLY

willingness to invest in private companies (+)
team)
Dietl and Theoretical Platform theory, property rights Professional European football clubs Sponsoring revenue Member association (+)
Weingaertner theory
(2011)
Wicker et al. (2012) Empirical Platform theory, property rights Nationwide online survey of amateur equestrian Sponsoring revenue Member association (+)
theory sports institutions in Germany in 2009 (n = 574
private firms
and n = 1165 member associations)
Nowy et al. (2015) Empirical Property rights theory Nationwide online survey of amateur equestrian Overall financial performance For-profit organizations (+)
sports institutions in Germany in 2013 (n = 1640 Price structure Non-profit organizations
non-profit (−)
and n = 732 for-profit sports organizations)

273
274 M. ROHDE AND C. BREUER

troubles and went bankrupt or had to be bailed out by the state despite being incorporated
(Hamann, 2013).
A number of research articles have analyzed the financial impact of the legal form and
associated governance structure of professional sports clubs (Table 2). Based on property
rights theory and the assumption that the zero transaction cost notion generally does not
hold in reality, Franck and Dietl (2007) argue that the German football governance system
and its focus on member associations have a positive impact on value creation because this
legal form attracts fans and sponsors. In contrast, national systems that are open to inves-
tors have a positive impact on profitability because the primary objective of private owners
is profit maximization. Dilger (2009) suggests that member associations would facilitate
the generation of a risk-adjusted return, as profit-oriented organizations would not be
willing or able to compete in the competitive environment of professional team sports.
Franck (2010a) theoretically analyzes the impact of the legal form on the spending
power of European football clubs. He suggests that in the overinvestment environment
of European football (Dietl et al., 2008), football clubs generate a competitive advantage
through superior spending power rather than profitability. Superior spending power in
turn results from the club’s capability to channel funds into football and its ability to
access private funds to invest in the team.
Dietl and Weingaertner (2011) apply platform theory to professional football clubs and
show that – consistent with Franck’s (2010) analysis – member associations are the pre-
ferred legal form to maximize sponsorship revenues. In contrast, private companies and
public corporations tend to have higher broadcasting and match-day revenues.
In the view of the authors, there is a clear lack of empirical studies applying property
rights and platform theory to professional football. The vast majority of empirical studies
are based on amateur horse sports and riding schools (Nowy, Wicker, Feiler, & Breuer,
2015; Smith, 2009; Wicker, Weingaertner, Breuer, & Dietl, 2012) because they are charac-
terized by the co-existence of for-profit and non-profit organizations. One notable excep-
tion is a study by Fritz (2006), who performed a stochastic frontier analysis of German
Bundesliga clubs from 1997/1998 to 2002/2003. In contrast to the widely held perception
that private companies operate more efficiently than non-profit organizations, the study
does not find any empirical support for the notion that legal form has an impact on total
net revenues generated by clubs. In fact, German professional football offers a rich
sample containing considerable internal variation in legal forms following the liberalization
in 1998. Approximately 75% of first division clubs and 25% of second division clubs had
incorporated as of the end of 2014. Nevertheless, except for the study by Fritz (2006),
most papers remain on the level of descriptive analyses. For example, Franck and Dietl
(2007) suggest that member associations are superior in attracting revenues from fans
and sponsors by referring to the leading attendance and commercial revenue figures of
the German Bundesliga in Europe. In our view, further empirical studies confirming the
causational relationships established by previous theoretical research would greatly
benefit the discussion on the impact of incorporations in German and European football.

Public investors
The listing of a firm on a stock exchange allows investors to acquire a share of the own-
ership of the firm and allows the firm to source capital at the lowest cost from a large
 EUROPEAN SPORT MANAGEMENT QUARTERLY 275

number of investors. In contrast to the US major leagues where only very few selected
clubs have decided in favor of this instrument, initial public offerings (IPOs) have been
quite common in European football since the 1990s (Andreff & Staudohar, 2000). In
general, European football club owners may have two motives to go public (Késenne,
2014). Profit-maximizing owners will financially restructure the firm. For example, Man-
chester United has used the proceeds from its IPO in 2012 to reduce its club debt. Win-
maximizing owners, however, will invest the additional funds into the team or
infrastructure.
Since 1983, the number of publicly listed football clubs in Europe has increased rapidly,
and this trend continued until the turn of the millennium (Figure 3). In 1983, Tottenham
Hotspur was the first European club to undertake a stock exchange listing. After the next
IPOs, Millwall in 1989 and Manchester United in 1991, the 1990s witnessed a rapid
increase in the number of English clubs going public (Morrow, 2003; Walters & Hamil,
2010). In 2000, this trend reached its peak, with more than 20 English clubs being
traded on a stock exchange. However, all but two English clubs were delisted again in
the 2000s, and as of 2014, Manchester United and Arsenal London were the only remain-
ing listed English football clubs. There are myriad reasons for this trend, and clubs often
cite the ongoing costs of maintaining a stock exchange listing, the lack of liquidity, and the
high share price volatility as reasons to go private (Aglietta, Andreff, & Drut, 2010; Benk-
raiem, Le Roy, & Louhichi, 2011). Walters and Hamil (2010, pp. 20–22) find that the
majority of publicly listed English clubs were unprofitable following their IPOs, which
reduced the interest of public investors. Furthermore, many English clubs have been
taken private by new majority investors.
Outside England, however, the entry of clubs into the stock market has taken a different
path. In 1987, Brøndy IF became the first publicly listed football club outside England
(Morrow, 2003, p. 104). Since the mid-1990s, a large number of top European football
clubs, including Celtic Glasgow (1995), FC Kopenhagen (1997), FC Porto (1998), Lazio
Roma (1998), and Glasgow Rangers (2000), have gone public. In contrast to the trend
in England, the number of stock exchange listings was still increasing by 2015, with the
authors identifying 33 non-English clubs listed on a stock exchange. As of March 2015,
23 of these 33 clubs were included in the Stoxx® Europe Football Index. The stock
market is a popular instrument, particularly in Denmark, where 10 teams were listed as

Figure 3. Public ownership of clubs in England and the rest of Europe since 1983. Sources: Stoxx®
Europe Football Index (2015); Bloomberg Eurokick Football Index (2013); Baur & McKeating (2011);
Footballeconomy.com (2008); Author research.
Note: No stock exchange listing prior to 1983; excluding GKS Katowice AS (Poland), Sileks Kratovo and Teteks Ad Tetovo
(both Macedonia) due to missing information on share issue.
276 M. ROHDE AND C. BREUER

of 2015; further, in Portugal, Turkey, and Italy, at least 3 teams were traded on a public
stock market. Additional public clubs are found in France, Scotland, Poland, Macedonia,
Sweden, the Netherlands, and Germany.
There are limited available studies on the sporting and financial impact of stock
exchange listings (Table 3). Most studies analyze the impact of a public listing on sporting
and financial performance (Baur & McKeating, 2011; Gerrard, 2005), a potential change in
the objective function (Conn, 1997; Leach & Szymanski, 2015), and changes in governance
structure (Franck, 2010a). Gerrard (2005) develops a resource-utilization model and
applies it to Premier League teams for the period 1998–2002. His findings suggest that
a stock market listing improves financial performance. In contrast, Baur and McKeating
(2011) find that IPOs do not generally improve sporting performance, likely because the
funds are used for balance sheet consolidation rather than for team investments. Accord-
ing to the study, there is an improvement in national league performance for second div-
ision teams and the ‘Big Five’ leagues, while an IPO has no significant effect on either
league performance in first divisions or international performance in UEFA competitions.
Conn (1997, p. 154) suggests that floated public companies pursue profit maximization
for their shareholders as their primary objective. However, Leach and Szymanski (2015)
find no evidence that publicly listed English football clubs have shifted toward profit max-
imization after being listed. In particular, they show that a stock exchange listing has only a
short-term positive effect on revenues but that long-term revenues are not significantly
improved. This finding is consistent with their view that English football clubs were
already heavily oriented toward profit maximization before the trend in stock exchange
listings. Franck (2010a) argues that the governance structure of a publicly listed football
club is not optimal in the overinvestment environment in which European football
clubs operate. Team investments are smaller than those of private companies. This
finding is partly challenged by Leach and Szymanski’s (2015) observation that the wage
bills of publicly listed clubs are significantly higher, despite the assumption that the share-
holder structure should improve transparency and governance.
One key shortfall of the available articles is that they do not account for the property
rights theory. Because publicly listed companies may be subject to different shareholder
structures, their governance and property rights may also differ. For example, Leach
and Szymanski (2015) report that only 3 of the 16 English clubs in their sample placed
100% of their shares on a stock exchange and that only 2 additional clubs placed a majority
of their shares on a stock exchange. Thus, comparing clubs with distributed ownership
with clubs owned by a majority investor may be more meaningful.
Moreover, given the very different experiences in and outside England, we would
encourage future articles to analyze the financial and sporting impact of public listings
separately for English and non-English teams.

Private investors
Private investors can take many forms, acquire majority or minority stakes, and invest in
public or private companies (Franck, 2010a). One of the earliest types of private investors
were company clubs (Hoehn & Szymanski, 1999). The origins of these company clubs can
be traced back to the worker movement in the late nineteenth century when companies
founded clubs to enact company sports. Prominent European examples of such
Table 3. Literature review: the financial impact of public investors on football/sports clubs.
Author(s) and year Theoretical vs. Dependent variable/estimation Hypothesized impact
of publication empirical paper Applied theories Data/scope technique /significant findings
Gerrard (2005) Empirical Resource-based view Premier League clubs (1998–2002) Wages Stock exchange listing
(−)
Sporting performance Stock exchange listing
(no effect)
Team revenue Stock exchange listing (+)
Profit margin Stock exchange listing (+)
Franck (2010a) Theoretical Firm theory, overinvestment, European football Team investments Public corporation (−)
property rights theory
Baur and McKeating Empirical Corporate finance 27 publicly listed European football clubs quoted National performance (‘Big Five’ Initial public offering (+)

EUROPEAN SPORT MANAGEMENT QUARTERLY

(2011) on the Dow Jones STOXX football index (1990– leagues, points per game)
2008) National performance (second Initial public offering (+)
division, points per game)
National performance (first Initial public offering (no
division, points per game) effect)
International performance Initial public offering (no
(UEFA club coefficient) effect)
Leach and Empirical Profit maximization vs. utility 16 English football clubs that acquired a stock Performance Stock exchange listing
Szymanski (2015) maximization exchange listing in the mid-1990s (no effect)
Short-term revenues Stock exchange listing (+)
Long-term revenues Stock exchange listing
(no effect)

277
278 M. ROHDE AND C. BREUER

company clubs include Manchester United (1878), Arsenal London (1886), Carl Zeiss Jena
(1903), Bayer 04 Leverkusen (1904), Stade Reims (1910), AC Parma (1913), PSV Eindho-
ven (1913), and FC Sochaux (1928). Later, wealthy regional and national businessmen and
families also became interested in acquiring European football clubs. For example, the
Agnelli family began to support Juventus Turin as early as 1923, when Eduardo Agnelli
began to sponsor the club and Juventus Turin completed the first documented pro-
fessional player transfer. As of 2016, the Agnelli family still owns the majority share of
the club. Other family-owned clubs include, for example, the Peugeuot family’s FC
Sochaux-Montbeliard (since 1928), the Pinault family’s Stade Rennais (since 1998), the
Sensi family’s AS Roma (2004–2011), the Semerano family (1994–2012) and the Savino
family (since 2012) with Lecce, and the Resta family (2003–2006) and the Da Salvo
family (since 2006) with Novara.
The entry of individual businessmen as investors is a phenomenon observed through-
out Europe. For example, SAP co-founder Dietmar Hopp has invested in German club
1899 Hoffenheim and was allowed to take over 96% of the club’s shares by July 2015.
The President and CEO of Italian leather goods company Tod’s, Diego Della Valle,
acquired ACF Fiorentina in 2002. Robert Louis-Dreyfus, the former CEO of Adidas
and Saatchi & Saatchi, acquired a majority stake in Olympique de Marseille in 1996
and henceforth invested heavily in the club. Since the beginning of the 1980s, non-tra-
ditional investors have begun to acquire European football clubs. These include industrial
goods companies (e.g. Danone, M6 Group), strategic investors (e.g. Canal+, Bet365),
sports investment companies (e.g. Sisu Capital, Otium Entertainment Group, Fenway
Sports Group, General Sports & Entertainment), and other football clubs (e.g. AC Milan).
The theoretical importance of the majority ownership of a club is based on property
rights (Franck, 2010a). The residual decision rights of the majority investors create a
decision autonomy that allows the investor to use the club as an instrument to foster
his other businesses, gain access to particular club resources and transactions, receive
public acclaim, and enjoy decision autonomy in the club (Franck, 2010b). In fact, sugar
daddies such as Hannover 96’s Martin Kind have admitted publicly that they have no
interest in maintaining a minority share and that they aim to take over the club fully
after they have passed the period of 20 years of supporting the club as demanded by
German league regulation.
Franck (2010b) notes that sugar daddies have become the dominant financing concept
in England, Eastern Europe, and parts of Italy. In countries without an abundance of sugar
daddies, access to injections of funds is considered a key requirement to improve a club’s
international competitiveness (Barajas & Rodriguez, 2014). The financing concept of sugar
daddies entails the direct injection of funds into football operations through so-called ‘soft
loans’ that allow clubs to use interest-free debt (Franck & Lang, 2014). The pure size of
these monetary injections through soft loans may exceed the €100 mn threshold. For
example, in 2008, Roman Abramovich (Chelsea, £701 mn), Mike Ashley (Newcastle
United, £238 mn), and Mohamed Al Fayed (Fulham, £175 mn) provided tremendous
funds to their teams. Similarly, Kuper (2009) suggests that there are only two contempor-
ary financing models in European football. First, there are few traditional clubs such as
Manchester United or FC Barcelona, which are able to capitalize on their global brands.
All other clubs would need to find a sugar daddy to stay competitive in the long run.
 EUROPEAN SPORT MANAGEMENT QUARTERLY 279

A league that has witnessed considerable variation in private club ownership is French
Ligue 1. According to DNCG, the watchdog of French club finances, the number of Ligue
1 clubs controlled by private investors has grown to 18 of 20 clubs since the 1980s. By
2008, 14 of 20 Ligue 1 clubs were already controlled by private investors. As of 2014,
AC Ajaccio was the only Ligue 1 club fully controlled by its member association.
Stade Brest was controlled by three major shareholders with no single investor
owning a majority stake. All other Ligue 1 clubs were controlled by private majority
investors with a dominant stake. In Ligue 2, 11 clubs were controlled by majority share-
holders, 7 clubs had minority investors, and 2 clubs were fully controlled by their
members.5
The literature on private investors is already extensive and continues to grow, and it
concentrates mainly on the impact of private owners on the objective functions of
teams and the role of sugar daddies in the overinvestment environment of European pro-
fessional football (Table 4). The impact of private owners is generally suggested to be con-
trary to Rottenberg’s (1956) invariance proposition that talent distribution is independent
of legal ownership. Vrooman (1997) theoretically derives results indicating that so-called
sportsman owners, that is, private owners, of MLB franchises sacrifice franchise value for
winning. He also shows the presence of the ‘Steinbrenner effect’ for syndicated, that is,
minority, owners, who face incentives to increase their team investment compared to
sole owners. Lang, Grossmann, and Theiler (2011) extend Vrooman’s model based on
contest theory and find that sugar daddies have a positive impact on the sporting
success and revenues of professional sports clubs. However, the influence of private
owners on competitive balance and social welfare depends on the market size of the
team supported. If a sugar daddy injects money into a small market team, he may increase
the competitive balance but reduce social welfare. In the event of a sugar daddy investing
in a large market team, the impact is the reverse. Ruoss (2009, pp. 138–142) studies the
impact of supporter trust on the financial and sporting performance of English football
clubs. He finds that the operating margins of Championship clubs are positively affected
by the involvement of supporter trust in club corporate governance, while league rankings
are negatively affected in the short term.
Sugar daddies – private owners who invest tremendous sums into their clubs – have
also been credited with playing a special role in the overinvestment environment of Euro-
pean football. For example, private owners have been suggested to increase team invest-
ment and debt levels and reduce profitability more than public corporations (Franck,
2010a). Furthermore, the constitutions of privately owned clubs are better able to
absorb the capital that sugar daddies are willing to inject. In this context, the German
50 + 1 rule that bans the entry of sugar daddies has a negative impact on team investments
(Franck, 2010b). Using similar logic, Sass (2016) finds that the introduction of the UEFA
FFP rules reduces team investment by sugar daddies, which in turn leads to lower sporting
success, lower revenues, smaller market size, and – in the case of a sugar daddy supporting
a small market team – less competitive balance. Madden (2015) develops a laissez-faire
model of a sports league with benefactor owners and shows that in leagues with benefactor
owners and a relatively elastic supply of talent, the UEFA FFP regulations will reduce the
quality of all teams, season ticket prices, fan utility, and player wages. Further, Sass (2016)
and Madden (2015) implicitly question whether the entry of sugar daddies poses a second
external shift in the competitive balance of European football after the increase of payouts
 280
M. ROHDE AND C. BREUER
Table 4. Literature review: the financial impact of private investors on football/sports clubs.
Author(s) and year Theoretical vs. Dependent variable/estimation
of publication empirical paper Applied theories Data/scope technique Hypothesized impact/significant findings
Vrooman (1997) Theoretical Profit and win maximization MLB franchises Winning Sportsman owner (+)
Franchise value Sportsman owner (−)
Franck (2010a) Theoretical Overinvestment, sugar daddies European football Team investment Private owners (+)
Profitability Private owners (−)
Debt Private owners (+)
Franck (2010b) Theoretical Overinvestment, sugar daddies German football Team investment German 50 + 1 rule (−)
Lang et al. (2011) Theoretical Contest theory, profit and win Professional team sports Win percentage Sugar daddy (+)
maximization, sugar daddies Revenues Sugar daddy (+)
Competitive balance Sugar daddy of large market team (−), Sugar
daddy of small market team (+)
Social welfare Sugar daddy of large market team (+), Sugar
daddy of small market team (−)
Storm and Nielsen Theoretical Soft budget constraints, European football clubs Soft budget constraints (persistent Sugar daddy owners (+), loose taxation (+), soft
(2012) overspending (England, Italy, and losses, growing debt, economic or interest-free loans (+), stadium/
Spain) stability) infrastructure subsidies (+)
Franck and Lang Theoretical Risk taking, sugar daddies Football clubs Riskiness of investment strategy Sugar daddy (+), public sugar daddy (+),
(2014) competitor’s sugar daddy (+), club size (+)
Volatility of revenues Sugar daddy owner (+)
Competitive imbalance Sugar daddy owner (+)
Sass (2016) Theoretical Competitive balance, sugar European football Spending by sugar daddies UEFA Financial Fair Play (−)
daddies, overinvestment Competitive balance UEFA Financial Fair Play (−)
Grossmann (2015) Theoretical Evolutionary game theory, Sports contests Investment Evolutionary stable strategies (+)
contest theory Profits Evolutionary stable strategies (−)
Madden (2015) Theoretical Welfare, sugar daddies European football Quality of all teams UEFA Financial Fair Play (−)
All season ticket prices UEFA Financial Fair Play (−)
Utility of all fans UEFA Financial Fair Play (−)
Wage per unit of talent UEFA Financial Fair Play (−)
 EUROPEAN SPORT MANAGEMENT QUARTERLY 281

in the UEFA Champions League in 1999/2000 (Pawlowski, Breuer, & Hovemann, 2010).
Franck and Lang (2014) suggest that sugar daddy owners pursue riskier investment strat-
egies that lead to more volatile revenues and argue that public sugar daddies employ an
even riskier investment strategy than private sugar daddies. Owing to the common
league environment, sugar daddy owners will also increase the riskiness of the investment
strategies of competitors of the sugar daddy club.
Finally, a few additional theories have been applied to the concept of sugar daddies. For
example, applying the concept of soft budget constraints to the overspending environment
in European football, Storm and Nielsen (2012) apply show that sugar daddy owners lead
to soft budget constraints as characterized by persistent losses and growing debt with sim-
ultaneous economic stability. Grossman (2013) adapts evolutionary game theory to sports
contests and suggests that evolutionary stable strategies increase team investment and
reduce profits more than profit maximization strategies. Dimitropoulos and Tsagkanos
(2012) find that managerial ownership (i.e. managers owning a stake) and institutional
ownership (i.e. institutional investors owning a stake) of European football clubs positively
affect financial performance.
An evaluation of the reviewed literature reveals two major deficits and associated
research gaps. First, the vague concept of a sugar daddy as a money-injecting private
owner may be sufficient for game-theoretical analyses (Franck, 2010b; Franck & Lang,
2014; Sass, 2016). However, any application to real-world settings requires a clear defi-
nition to distinguish sugar daddy owners from other private owners. Some so-called
sugar daddies may inject money into football clubs as long as their motivation endures.
However, if they lose interest for whatever reason, their financial injections may stop.
For example, Silvio Berlusconi has been reported to have invested enormous sums into
AC Milan during his active political career but has recently reduced his team
investments sharply and is said to be looking for new owners. From this perspective, Vroo-
man’s (1997) approach of analyzing the effect of sole or majority owners on the one hand
and minority owners on the other hand is considered a reliable approach to empirical
research.
In general, the core research gap lies in the area of empirical evidence. Many of the pre-
sented theoretical studies would benefit from empirical analysis testing the suggested
financial impact of sugar daddies on team investments, sporting success, profitability,
and competitive balance.

Foreign investors
The latest step in the historic development of European football clubs is internationaliza-
tion and the entry of foreign investors. Clubs increasingly source players from emerging
countries, establish so-called ‘feeder clubs’ as cooperation partners, and conduct inter-
national marketing travel to and open commercial offices in key future sales regions. In
addition to the increasing commercial activities and presence of clubs abroad, league
associations have also played a pivotal role in deregulating the market and growing the
international reach of clubs (Hoehn & Szymanski, 1999; Nauright & Ramfjord, 2010).
These measures by league associations include the legal and ownership unbundling of
clubs (see above), the central negotiation of regional TV deals, and the support of clubs
in their internationalization activities through subsidies for marketing tours or the
282 M. ROHDE AND C. BREUER

Figure 4. Foreign ownership of first and second division clubs in England since 1996. Sources: Forbes;
The Guardian; Club homepages; Author research.
Notes: No foreign investors prior to 1997; balanced panel based on 1st and 2nd division clubs as of 06/2014.

provision of infrastructure and contacts abroad. An important exception to and structural

break from the deregulation of national markets, however, is the introduction of the UEFA
FFP rules, which are expected to have a significant financial and sporting impact on
national leagues (Peeters & Szymanski, 2014).
The origin of investors is essential because of the presence of different objective func-
tions in different markets. For example, owners in the US market are generally considered
to be profit maximizers (e.g. Rottenberg, 1956). On the other hand, owners in Central
Europe and to some degree in England are considered to be win or utility maximizers
(Andreff & Staudohar, 2000; Garcia-del-Barrio & Szymanski, 2009; Sloane, 1971). Thus,
the influx of foreign investors into European football may lead to a shift in the objective
functions pursued by clubs.
The number of foreign investors in English football has grown significantly over the
past two decades (Figure 4). Prior to 1997, when the Egyptian businessman Mohamed
Al Fayed acquired Fulham, there were no foreign majority investors in English football
(Nauright & Ramfjord, 2010). However, foreign investors remained skeptical until June
2003, when the Russian investor Roman Abramovich bought Chelsea London. After the
perceived success of Abramovich, additional investors soon followed, including Antonio
Calliendo in the Queens Park Rangers in August 2003, the American businessmen
George Gillett and Tom Hicks in Liverpool in February 2004, and Malcolm Glazer in
Manchester United in May 2005. By 2010, foreign investors owned half of all the
Premier league clubs.
Based on the Guardian and other public sources, we determined that in 2014, 60% of
Premier League clubs and half of Championship clubs were majority owned by foreign
shareholders (Table 5). US investors represented the largest group, with five in the
Premier League (Stan Kroenke, Randy Lerner, Fenway Sports Group, Glazer family, Dru-
maville Consortium) and two in the Championship (General Sports and Entertainment,
John Berylson).
Few notable articles on the financial impact of international investors on football clubs
exist. Most articles in this area compare the European and US sporting systems (e.g.
Dobson & Goddard, 2011). For instance, Hoehn and Szymanski (1999) analyze the com-
mercialization and Americanization of European football, which in turn has increased the
attractiveness of European football clubs to American and foreign investors (Nauright &
Ramfjord, 2010). The latter article is a notable exception, as it suggests that North
 EUROPEAN SPORT MANAGEMENT QUARTERLY 283

Table 5. Foreign owners of English Premier League and championship clubs.

Premier League Championship
Club Majority owner Origin Club Majority owner Origin
Arsenal London Stan Kroenke US Derby County General Sports & US
Entertainment
Aston Villa Randy Lerner US Millwall John Berylson US
Liverpool Fenway Sports Group US Queens Park Rangers Tony Fernandes MAL
Manchester United Glazer family US Birmingham City Carson Yeung HK
Fulham Drumaville Consortium US Leicester City Vichai Srivaddhanaprabha THA
Sunderland Shahid Khan PAK Blackburn Rovers VH Group IND
Cardiff City Vincent Tan MAL Nottingham Forest Fawaz Al-Hasawi KUW
Manchester City Sheikh Mansour UAE Reading Anton Zingarevich RUS
Hull City Allam family EGY Watford Pozzo family ITA
Chelsea Roman Abramovich RUS Sheffield Wednesday Milan Mandarić SER
Southampton Katharina Liebherr SUI Bournemouth Maxim Demin RUS
West Ham United David Sullivan & David WAL Charlton Athletic Roland Duchatelet BEL
Gold
Newcastle United Mike Ashley ENG Bolton Wanderers Eddie Davis ENG
Norwich City D. Smith/M. Wynn-Jones ENG Wigan Athletic Dave Whelan ENG
Stoke City Peter & Denise Coates ENG Yeovil Town John Fry ENG
Tottenham Hotspur Enic International ENG Barnsley Peter Ridsdale ENG
Limited
West Bromwich Jeremy Peace ENG Blackpool Owen Oyston ENG
Albion
1 1
Crystal Palace n/a n/a Brighton & Hove Tony Bloom ENG
Albion
Swansea City n/a1 n/a1 Doncaster Rovers The Westferry Consortium ENG
Everton n/a1 n/a1 Ipswich Town Marcus Evans ENG
Leeds United Ken Bates ENG
Middlesbrough Steve Gibson ENG
Huddersfield Town Dean Hoyle ENG
Burnley n/a1 n/a1
Notes: Ownership as of 2013/2014 season; Country codes: BEL = Belgium, EGY = Egypt, IND = India, KUW = Kuwait, MAL =
Malaysia, PAK = Pakistan, RUS = Russia, SUI = Switzerland, WAL = Wales, THA = Thailand, UAE = United Arab Emirates,
US = United States, ITA = Italy, SER = Serbia, (1) Distributed ownership.
Sources: Forbes; The Guardian; Club homepages; Author research.

American investors drive the profitability and professionalization of the marketing and
management practices of European clubs. Wilson et al. (2013) analyze the financial per-
formance of three competitive ownership models in the English Premier League. Based on
straightforward correlation analyses, ANOVA tests, and post hoc procedures, the study
finds that the foreign private ownership model is less financially efficient than the stock
market model. However, clubs owned by foreign private investors perform better in the
national league than domestically owned private clubs and publicly listed corporations.
In a novel study, Rohde and Breuer (2016) analyze the financial impact of foreign
private investors by applying property rights theory to a seven-season panel from the
English Premier League, and they find that foreign private investors have a positive
impact on wages and a negative impact on profits. In summary, many researchers are
aware of the importance of foreign investors and focus their research on the scope of
selected club or player acquisitions by foreign investors (Franck & Lang, 2014; Storm &
Nielsen, 2012); however, very few articles analyze the financial impact of foreign investors
in more detail. Further empirical analyzes studying the impact of foreign investors are thus
recommended.
Given the prevalence and impact of foreign investors in European football, it is very
surprising that more studies have not yet been devoted to the financial impact of
284 M. ROHDE AND C. BREUER

foreign investors. Two potential reasons for this research gap are the novelty of this
research area and the absence of a systematic, public database of foreign investors that
goes beyond the top 20 richest owners on the Forbes list. This article has drawn on a
unique database covering all the owners in the two premium divisions in England,
France, Germany, and Italy since 2003.
With respect to the novel phenomenon of multi-ownership, the authors are not aware
of any theoretical or empirical articles studying this phenomenon in European football.
Based on the rapid growth of this phenomenon, its economic importance and the interest
among regulators in addressing this trend in the future, further studies are urgently
needed.

Summary of available studies and remaining research gaps

An increasing number of theoretical and empirical studies have aimed to examine the
market for football club investors since approximately 2010. This growth in the literature
stream is largely due to three reasons. First, the increased commercialization of the football
market has led to the exponentiation of revenues. TV revenues have reached unprece-
dented levels, while revenues from social media and regional sponsoring have emerged
as new income sources. Second, football club investors have gained importance in the
clubs’ rat race to increase salaries and transfer fees and thus to improve club competitive-
ness. No less importantly, the introduction of the UEFA FFP rules highlighted a poten-
tially ruinous development in European football for the general public. Finally, the
increasing availability of information about European football, including P&L data, trans-
fer data, and team salaries and budgets, has created the opportunity the test available the-
ories through empirical studies.
With respect to the topics studied, the literature stream on football club investors has
developed four distinct but related research fields. The first field covers the application of
property rights theory to European football clubs in order to analyze the impact of incor-
porations on team revenues, profitability, and team investments (Dietl & Weingaertner,
2011; Franck, 2010a; Franck & Dietl, 2007; Nowy et al., 2015; Wicker et al., 2012).
However, the financial impact of member associations remains in dispute. On the one
hand, property rights theory predicts that member associations are beneficial in channel-
ing funds to the team (Franck, 2010a) and driving sponsoring revenue (Dietl & Weingaert-
ner, 2011). On the other hand, empirical studies from other industries have shown the
positive influence of for-profit organizations on overall financial performance. Previous
empirical research in European football has found no effect of incorporations on relative
revenues (Fritz, 2006). The second research field that is also controversially discussed ana-
lyzes the financial and sporting impact of public listings of European football clubs (Baur
& McKeating, 2011; Leach & Szymanski, 2015). Despite consistent evidence of the nega-
tive influence of public listings on team investments (Franck, 2010a; Gerrard, 2005), the
evidence regarding its impact on sporting performance ranges from no effect (Gerrard,
2005; Leach & Szymanski, 2015) to a positive effect that is limited to second division
teams to no effect on international performance (Baur & McKeating, 2011). The third
area comprises theoretical studies on capital injections by private investors in the overin-
vestment environment of European football. On the one hand, such studies have dealt
with the impact of sugar daddies on team investment, budget constraints and profitability
 EUROPEAN SPORT MANAGEMENT QUARTERLY 285

(Franck, 2010a, 2010b; Grossmann, 2015; Storm & Nielsen, 2012). These mostly theory-
based studies generally conclude that there is a trade-off between desired consequences
(e.g. increased team investments, better team performance, higher revenues) and unde-
sired consequences (e.g. increased debt, lower profits, higher risk and revenue volatility)
with private majority ownership. On the other hand, an increasing number of papers
study the influence of sugar daddies on competitive balance and social welfare (Lang
et al., 2011) and the limiting effect of the UEFA FFP rules (Madden, 2015; Sass, 2016).
Finally, a research field that is still small but that is expected to gain significantly in impor-
tance analyzes the impact of foreign investors on profitability and sporting success (Nau-
right & Ramfjord, 2010; Rohde & Breuer, 2016; Wilson et al., 2013). Existing research
consistently finds a positive impact of foreign investors on team investment and sporting
performance but disagrees with other research regarding the impact on club profitability.
While North American investors are said to be profit maximizers (Nauright & Ramfjord,
2010), empirical studies have found foreign investors in the English Premier League to be
less financially efficient (Wilson et al., 2013) and to have a negative impact on profits
(Rohde & Breuer, 2016).
A review of the development and status-quo of the literature reveals that the following
research gaps remain to be studied at an appropriate depth. First, this review paper has
shown the need for further empirical studies and the existence of data and samples to
test the available theories. This is especially true with regard to empirical tests of the appli-
cation of property rights theory to European football. Two very interesting developments
to be studied are the process of incorporation in German football, as well as the potential
associated increase in efficiency, and the entry of private majority investors in France,
along with the corresponding financial and sporting consequences. Additionally, there
is a need for comparative studies of stock exchange listings inside and outside England
to explain the paradox of de-listings in England and further listings in continental
Europe. Furthermore, except for a few studies, the promising new research field studying
the impact of foreign investors and multi-ownership synergies has scarcely been
addressed. Finally, research on the impact of football club investors would benefit from
a holistic analysis examining not only a single dependent variable such as profitability
or league points but also a combination of various sporting and financial variables that
more realistically reflect the optimizing behavior of managers (Plumley et al., 2017).

Management implications
Based on the presented literature, football club owners and managers can draw con-
clusions regarding their preferred ownership and governance model. First, the fully
member-owned club seems to be an ownership model that only a few large global
brands can use while sustainably remaining competitive. These clubs tend to generate sig-
nificant sponsoring and merchandise revenues (Dietl & Weingaertner, 2011), and their
revenue growth is based on a strong fan base that regularly opposes the entry of private
investors. Required financial resources may be sourced from internal income or alternative
financing instruments, such as fan bonds. In 2016, leading member-owned clubs include
Real Madrid, FC Barcelona, Benfica Lisbon, and Schalke 04. Smaller member-owned clubs
such as VfB Stuttgart, Werder Bremen, or Hamburger SV would be well advised to attract
286 M. ROHDE AND C. BREUER

strategic advisors if they aim to regain national and international competitiveness on the
basis of increased spending power.
Second, public listings have a positive impact on short-term revenues and national
league performance, but neither a long-term revenue effect nor an effect on international
performance in UEFA competitions could be determined (Baur & McKeating, 2011; Leach
& Szymanski, 2015). Thus, this model may be beneficial for clubs from smaller leagues
with a primary focus on national competitions (e.g. Denmark, Turkey, and Portugal) or
German clubs that are prevented from privatizing due to the 50 + 1 rule (e.g. Borussia
Dortmund). In contrast, top clubs from the ‘Big Five’ European leagues that are listed
(e.g. Juventus, Olympique Lyonnais, AS Roma) may consider going private to attract
additional resources. An exception to this conclusion may be Manchester United,
which managed to go public in a foreign market and attract additional resources.
Third, private majority investors have been shown to drive team investment, sporting
success, and revenues, but they lead to lower profitability and increase the volatility of rev-
enues and the risk of financial mismanagement (Franck, 2010a; Franck & Lang, 2014; Lang
et al., 2011). Owners will have the strongest incentives to invest if they own concentrated
property rights and thus gain control over a club. However, this model critically depends
on the alignment of interests between the club and the owner. For example, Silvio Berlus-
coni’s AC Milan performed very well during his political career when he invested heavily
in the club but suffered from poorer performance thereafter. Additionally, the model is
subject to an increased risk of financial mismanagement, as evidenced by, for example,
the Italian and Greek football scandals (Carmichael, Thomas, & Rossi, 2014). Thus, elab-
orate control mechanisms by the league and club management are required. This may be
particularly the case for foreign investors who often have larger private resources that they
may inject into a club but that may also follow different objectives that need to be aligned
with the club’s objectives.
Finally, this review paper has informed league administrators and the UEFA of the effects
of regulations on team investments by private owners. It has been argued that both the
UEFA FFP regulations and the German 50 + 1 rule reduce team investment (Franck,
2010b; Sass, 2016). Given the objective of the FFP rules of improving the financial health
of European football, the UEFA may be credited with successfully reducing the incentives
for owners to overinvest. However, it may be argued that the German 50 + 1 rule constitutes
a competitive disadvantage for those German clubs competing in UEFA competitions, as
they are prevented by the regulation from benefitting from private majority owners’ spend-
ing power. Within the German league, the rule may also be criticized as benefitting clubs
exempted from the rule. Notwithstanding the protection of sporting interests from the puta-
tively conflicting interests of an owner, German league administrators would be well advised
to further loosen or abandon the 50 + 1 rule and/or encourage a strict(er) enforcement of the
UEFA FFP rules to foster the international competitiveness of its clubs.

Notes
1. The following analyses are based on revenue and wage data from Deloitte, DNCP, and club
accounts; market value and transfer fee data from Transfermarket.de; and author calcu-
lations. The detailed results are available from the authors upon request and refer to first
and second division football clubs in England, France, Germany, and Italy as of June 2012.
 EUROPEAN SPORT MANAGEMENT QUARTERLY 287

2. The figures are based on author calculations using public data for first and second division
clubs in England, Germany, Italy, and France as published by Deloitte, DNCP, club accounts,
and Transfermarkt.de. “Leverage” implies correlation rather than causation. Data summaries
are available upon request.
3. See note 2.
4. As of 10 May 2016, Transfermarkt.de lists nine UEFA Champions League players worth
more than €20 mn. A detailed list is available upon request.
5. A detailed overview of the private ownership of Ligue 1 and Ligue 2 clubs is available from
the authors upon request.

Disclosure statement
No potential conflict of interest was reported by the author(s).

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