Cost efficiency of French soccer league teams

Abstract

This article evaluates the operational activities of French soccer clubs from 2003 to 2011 by using a finite mixture model that allows controlling for unobserved heterogeneity. In doing so, a stochastic frontier latent class model, which allows the existence of different technologies, is adopted to estimate cost frontiers. This procedure not only enables us to identify different groups of French soccer clubs but also permits to analyse their cost efficiency. The main result is that there are two groups among the French soccer clubs, both following completely different ‘technologies’ to obtain league points, suggesting that business strategies need to be adapted to the characteristics of the clubs. Some managerial implications are developed.

Keywords:

• cost efficiency
• latent class model
• soccer clubs

JEL Classification:

• L83
• C23

Notes

¹ To the best of our knowledge, Barros et al. (2008) is the only exception.

² Latent class models are also called finite mixture models in the literature.

³ Further technical details on the estimation procedure are provided in the Appendix.

⁴ In contrast to US professional sport leagues that use a closed structure, most European leagues are organized in such a way that at the end of each season some teams are transferred between divisions. The best-ranked teams in each division at the end of the season are promoted to the division above and, at the same time, the worst-ranked teams are relegated to the lower division. See Noll (2003) for a study which analyses the differences between these two systems.