Stakeholder salience of economic investors on professional football clubs in Europe

ABSTRACT

Research question: In this study we analyse whether ownership concentration serves as a corporate governance (CG) mechanism for professional football clubs in Europe and show its impact on clubs’ sporting performance. Based on stakeholder salience theory, we examine how investors exert their salience and which objectives they follow. Specifically, we differentiate between economic and sporting investor types and examine whether economic investors act as a CG mechanism.

Research methods: We employ a database of 160 privately and publicly owned football clubs in Europe for the period 2002–2015 to measure the effects driven by ownership concentration after controlling for endogeneity based on a dynamic panel generalised method of moments.

Results and findings: The results indicate that economic investors favour sporting over economic performance. We conclude that the investments in player talent are made under high risk of outcome uncertainty and economic investors do not, or to a lesser extent, monitor club managers’ actions and do not serve as a CG mechanism.

Implications: This implies a need for football clubs’ investors to redefine their role to ensure a functioning governance system. The results further imply that archival CG research in football clubs should acknowledge the dynamic relationship between CG mechanisms and a club’s performance.

KEYWORDS:

• Football clubs
• corporate governance
• ownership concentration
• owner identity
• system GMM

Acknowledgement

The authors thank Tracy Taylor and the anonymous reviewers for their helpful comments and guidance in developing the article. They are also grateful for the insightful comments they received during the 2014 British Accounting and Finance Association Annual Conference in London.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Frerich Buchholz http://orcid.org/0000-0002-4497-5091

Kerstin Lopatta http://orcid.org/0000-0003-0267-0588

Notes

1 Company data and foreign exchange rates taken from YAHOO! Finance (http://finance.yahoo.com/). Average market capitalisation of the FTSE Smallcap Index taken from The Telegraph website (http://shares.telegraph.co.uk/indices/?index=SMX) on 5 October, 2015.

Additional information

Funding

This work was supported by the German Academic Exchange Service (Deutscher Akademischer Austauschdienst) as part of its congress and lecture tour programme. The authors are also grateful for funding provided by Heinz Neumüller Foundation as part of its One-Year-Scholarship 2013.