Working Paper Series, Paper No. 06-21
Goal! Profit maximization and win maximization in football leagues
Pedro Garcia-del-Barro1 and Stefan Szymanski2
October 2006
Abstract
In this paper we estimate the best responses of football clubs to the choices of other clubs
in Spanish and English leagues over the period 1994-2004. We find that choices are more closely
approximated by win maximization than by profit maximization in both the short term and the
long term. We examine club characteristics that might explain variations in choices between
Spanish clubs.
JEL Classification Codes: L83
Keywords:
*We are indebted to Angel Barajas, Miguel Cardenal, Stephanie Leach, Joaquin Serrano, Carlos
del Campo, Francesc Pujol, and Emilio Garcia-Silvero for their support and advice. Errors are
our own.
1
Pedro Garcia-del-Barro, Universidad Internacional de Cataluna, Immaculada 22, 08017
Barcelona. Tel : (34) 93 2541800, Fax: (34) 93 4187673, e-mail: [email protected]; and
Universidad Pompeu-Fabra. The author gratefully acknowledges financial support from the
Ministerio de Ciencia y Tecnologia (SEJ2004-04649, Spain).
2
Stefan Szymanski, Tanaka Business School, Imperial College London, South
Kensington campus, SW7 2AZ, UK. Tel : (44) 20 7594 9107, Fax: (44) 20 7823 7685, e-mail:
[email protected].
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Table 1. Operating profits in the “Big Five” European football leagues
Profits (million €)
1996
English Premiership
1997
1998
1999
2000
77
129
143
104
Spanish 1ª Liga
-23
19
-124
-170
Spanish 1ª Liga *
Italian Serie A
-21
17
a
-3
8
-101
-36
-143
-114
-152
-46
German Bundesliga
French Ligue 1
5
a
2001
2002
2003
2004
185
223
80
121
125
a
-295
-216
b
-511
-404
-302
-381
b
b
-341
37
27
47
35
87
100
138
52
-7
-46
-70
36
-41
-98
-61
-102
Source: Deloitte&Touche Annual Review of Football Finance (2003, 2005).
*Authors’ calculations from clubs accounts. Out of the 20 teams competing in the LFP, we mark with “a” the seasons in
which 19 clubs’ accounts were used, while “b” implies that only 15 or 16 team’ accounts were available.
Figure 1. Operating profits (England, Italy and Spain).
400
200
England
0
Spain
-200
Italy
-400
-600
1996
1997
1998
1999
2000
2001
2002
2003
2004
Table 2. Average revenues and average wages (as % of the revenues) for seasons.
AvRevEuros)
Spanish Football
English Football
Year
N
1ª division
N
2ª division
N
PremierLeague
N
Championship
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
1
5
19
20
18
19
19
16
15
15
11
4,268,892
9,225,842
15,620,150
24,263,940
29,149,850
30,519,530
34,147,940
35,665,650
41,772,720
48,769,060
58,988,410
1
1
4
5
9
10
11
12
11
11
1
3,044,909
2,686,473
2,509,873
4,008,501
6,243,958
4,883,988
6,611,016
7,079,504
5,564,037
3,889,198
4,143,813
18
18
18
18
16
18
17
18
19
20
18
19,630,924
24,614,092
27,062,053
35,646,941
50,280,071
53,990,072
63,663,877
74,059,982
86,449,068
91,877,205
100,987,045
17
16
15
14
16
14
14
16
16
16
18
6,638,792
6,356,702
6,815,186
8,796,836
12,717,063
11,092,033
13,653,991
14,030,414
19,887,189
16,047,064
18,812,340
%AvWage
Spanish Football
English Football
Year
N
1ª division
N
2ª division
N
PremierLeague
N
Championship
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
1
5
19
20
18
19
19
16
15
15
11
73%
68%
55%
45%
54%
55%
55%
70%
73%
70%
63%
1
1
4
5
9
10
11
12
11
11
1
48%
94%
68%
91%
72%
102%
82%
104%
138%
140%
85%
18
18
18
18
16
18
17
18
19
20
18
43%
42%
48%
47%
49%
55%
59%
58%
61%
61%
61%
17
16
15
14
16
14
14
16
16
16
18
60%
65%
75%
67%
70%
73%
94%
98%
73%
90%
71%
The records for the English leagues have been converted to Euros at the current exchange rate (1GBP = 1.47 Euros).
N: indicates the number of teams for which the financial information was available each season.
Table 3. Revenues and league position. Dep.variable: logRelRev = log(Rev/AvRev)
Spanish LFP
Unbalanced Panel
(1994-2004)
LogRank
logRelRev(-1)
Constant
Instruments
2
R
F-statistic *
No teams
No obs.
Premier League
Unbalanced Panel
(1994-2004)
LogRank
logRelRev(-1)
Constant
Instruments
R2
F-statistic *
No teams
No obs.
(1)
(2)
(3)
ols
fixed effects
IV fixed effects
0.295
(9.75)
0.636
(14.3)
-0.412
(-8.83)
0.240
(6.06)
0.338
(4.91)
-0.499
(-9.64)
0.241
(5.94)
0.333
(3.08)
-0.501
(-7.53)
no
0.867
736.6
37
189
no
0.862
36.97
37
189
wages(-1)
(1b)
(2b)
(3b)
ols
fixed effects
IV fixed effects
0.184
(10.1)
0.698
(20.6)
-0.150
(-9.10)
0.183
(12.9)
0.477
(13.1)
-0.215
(-13.0)
0.173
(11.7)
0.561
(11.9)
-0.189
(-9.89)
no
0.913
2812
57
432
no
0.909
242.6
57
432
wages(-1)
0.861
385.7
37
189
0.913
1217
57
432
Ols using robust standard errors. (t-statistics) in parenthesis. * Chi-2, instead of F-statistic, for model (3).
Table 4. League position and wage expenditure.
Dependent variable: logRank = − log(leaguePosition/(43 − leaguePosition))
Spanish LFP
(1)
(2)
(3)
Unbalanced Panel
(1994-2004)
log(Wage/AvW)
logRank(-1)
Constant
Instruments
R2
F-statistic *
No teams
No obs.
Premier League
Unbalanced Panel
(1994-2004)
log(Wage/AvW)
logRank(-1)
Constant
Instruments
R2
F-statistic *
No teams
No obs.
ols
fixed effects
IV fixed effects
0.706
(6.86)
0.357
(6.27)
0.734
(7.27)
0.618
(3.09)
0.189
(2.97)
0.798
(6.60)
0.634
(3.10)
0.177
(2.47)
0.812
(6.40)
no
0.643
173.3
40
236
no
0.639
15.73
40
236
Win%(-1) & Div(-1)
0.637
190.0
40
236
(1b)
(2b)
(3b)
ols
fixed effects
IV fixed effects
0.963
(9.67)
0.512
(9.75)
0.211
(3.89)
1.032
(6.17)
0.324
(5.82)
0.273
(4.91)
0.889
(5.14)
0.414
(6.68)
0.223
(3.85)
no
0.744
608.3
57
432
no
0.739
76.31
57
432
Win%(-1) & Div(-1)
0.743
181.6
57
432
Ols using robust standard errors. (t-statistics) in parenthesis. * Chi-2, instead of F-statistic, for model (3).
Table 5. Profit maximizing and win-maximizing positions in the football leagues.
Premier League
Average
1993-2004
Manchester United
Arsenal
Liverpool
Chelsea
Newcastle United
Aston Villa
Leeds United
TottenhamHotspur
West Ham United
Southampton
Blackburn Rovers
Everton
Fulham
Leicester City
Middlesbrough
Wimbledon
Sunderland
Bolton Wanderers
Charlton Athletic
Coventry City
Derby County
Manchester City
Ipswich Town
Sheffield Wednesday
Birmingham City
Nottingham Forest
Crystal Palace
Wolverhampton Wander
Barnsley
Bradford City
Sheffield United
Norwich City
Queen'
s Park Rangers
West Bromwich Albion
Preston North End
Watford
Portsmouth
Stoke City
Millwall
Tranmere Rovers
Burnley
Gillingham
Huddersfield Town
Port Vale
Stockport County
Oxford United
Reading
Southend United
Crewe Alexandra
Grimsby Town
Oldham Athletic
Walsall
Swindon Town
Luton Town
Bury
.(1)
.(2)
.(3)
Real
Position
Max
Wins
Max
Profit
2
3
4
6
7
8
8
11
12
13
13
14
14
14
15
15
20
20
20
21
21
22
22
22
22
23
25
27
27
28
29
30
30
30
32
32
32
33
34
34
34
35
35
37
37
38
38
38
38
39
39
40
41
41
42
5
9
11
9
8
12
12
12
14
14
19
16
20
14
17
15
14
14
16
19
20
18
18
19
19
20
18
18
20
19
22
20
26
15
23
24
25
20
24
23
23
18
27
25
25
30
29
23
22
28
24
24
26
22
31
23
29
33
30
29
33
34
33
35
35
38
36
39
35
37
36
35
35
37
38
39
37
37
38
39
39
38
37
39
38
40
39
41
36
40
40
40
38
40
40
40
38
41
41
41
42
42
40
40
42
41
41
41
40
43
Spanish LFP
Average
1994-2005
RealMadrid
Barcelona
Valencia
Celta
Deportivo
Athletic
Valladolid
RealSociedad
Mallorca
Malaga
Betis
Alaves
Espanyol
AtMadrid
Zaragoza
Oviedo
Racing
Sevilla
RayoVallecano
Villarreal
Tenerife
Recreativo
Sporting
LasPalmas
Salamanca
Getafe
Compostela
Numancia
Albacete
Levante
Lleida
Logrones
Leganes
Cordoba
Murcia
Hercules
.(4)
.(5)
.(6)
Real
Position
Max
Wins
Max
Profit
3
3
5
7
8
8
10
10
10
10
11
12
12
13
14
16
16
17
19
19
21
22
23
24
24
27
27
27
28
28
31
34
34
35
35
41
6
5
6
6
9
10
12
10
12
13
8
14
12
12
15
15
18
16
15
16
18
22
23
18
24
30
25
25
25
22
30
31
27
31
25
37
17
15
18
18
21
24
26
24
26
27
21
28
26
25
29
29
32
30
30
30
32
34
35
32
36
38
37
36
37
35
39
39
38
39
37
41
Table 6. Deviations from the profit-maximizing and winmaximizing position.
Spanish LFP (unbalanced) English leagues (unbalanced)
Variable
N
(pm - p)
(wm - p)
((pm - p)^2)/N
189
189
189
((wm – p)^2)/N
189
mean
sum
12.12
-0.48
N
mean
190.62
392
392
392
39.11
392
sum
15.55
-3.61
368.75
140.47
(pm - p) is the difference between the profit-maximizing position and the real one.
(wm - p) subtracts instead the actual position from the win-maximizing (or zero-profit) position.
9
Table 7. Factors explaining deviations from the profit maximizing position.
Spanish LFP (1ª and 2ª Division) Spanish LFP (1ª Division)
Variables
Coeff.
t-stat
P-value
Coeff.
t-stat
P-value
SecondDivision
-11.75 **
-12.82
0.000
HistoricalStatus
-1.43 **
-2.66
0.009
-1.33 *
-2.18
0.031
RelegationRisk
2.74 **
2.98
0.003
3.18 *
2.55
0.012
AssociativeClub
-0.98
-0.59
0.559
-1.58
-0.88
0.380
ControlConcentr
-0.45
-0.52
0.603
-0.39
-0.38
0.705
DirectorReward
-0.64
-0.74
0.461
-0.07
-0.08
0.939
AtleticBilbao
1.89
0.86
0.393
3.61
1.62
0.108
HomeGrown%
3.53
1.28
0.201
1.42
0.46
0.646
-3.08
0.002
-2.70
0.008
YearsPresident
-0.19 **
-0.26 **
Businessman
2.80 *
1.99
0.048
3.69
1.43
0.156
Constructor
4.49 **
2.76
0.006
7.54 **
2.60
0.011
Economist
-2.52
-0.84
0.402
-3.82
-0.75
0.454
Lawyer
2.69
1.50
0.136
4.37
1.55
0.123
MedicalDoctor
2.47
1.20
0.232
4.74
1.51
0.134
9.14
0.000
5.14
0.000
_cons
14.76 **
R2
No obs.
F-statistic
0.59
189
18.2 **
Cook-Weisberg
Shapiro-Wilk
13.83 **
0.22
135
2.69 **
0.791
0.127
0.809
0.030
** Indicates significant at 1% and * at 5%
Dependent variable
LeagPositPurch number of positions that the club "purchase" respect to the maximizing-profits position
[=profitmaximizingPosit - realPosition]
Explanatory variables
SecondDivision dummy gathering the teams in the second division league.
HistoricalStatus ranking of the teams as indicated by the historical cumulative points obtained in the 74
editions of 1ª division LFP, until 2005.
RelegationRisk dummy for teams that, on average in the period, find themselves within 4 positions
from the relegation-promotion positions (namely, between position 16 and 24 or
between 38 and 46).
AssociativeClub dummy for the clubs which are not shareholders companies [namely: Barcelona,
RealMadrid, Bilbao, Osasuna].
ControlConcentr dummy for teams with a high degree of control concentration (the proportion of shares
controlled by the same owner or entrepreneurial group is above 80% of the total
capital). Based on Barajas (2005), Table 4.2, p. 121.
DirectorReward dummy for teams which rewarded the members of its board of directors at 30/6/2000.
Source: Barajas (2005), Table 4.3, p. 124. (1: teams that pay; 0: do not pay. Teams for
which this information was not available were given value zero).
AtleticBilbao
dummy for the Athletic Club de Bilbao.
HomeGrown% percentage or share of home-grown players for each team and season.
YearsPresident years in which the same president is in the club.
Businessman
dummy for teams whose president is a businessman.
Constructor
dummy for teams whose president is a manager in a construction company.
Economist
dummy for teams whose president is an economist.
Lawyer
dummy for teams whose president is a lawyer.
MedicalDoctor dummy for teams whose president is medical doctor.
%
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Table A1. Profit maximizing and win-maximizing positions in the football leagues.
Premier League
Average
1993-2004
Manchester United
Arsenal
Liverpool
Chelsea
Newcastle United
Aston Villa
Leeds United
TottenhamHotspur
West Ham United
Southampton
Blackburn Rovers
Everton
Fulham
Leicester City
Middlesbrough
Wimbledon
Sunderland
Bolton Wanderers
Charlton Athletic
Coventry City
Derby County
Manchester City
Ipswich Town
Sheffield Wednesday
Birmingham City
Nottingham Forest
Crystal Palace
Wolverhampton Wander
Barnsley
Bradford City
Sheffield United
Norwich City
Queen'
s Park Rangers
West Bromwich Albion
Preston North End
Watford
Portsmouth
Stoke City
Millwall
Tranmere Rovers
Burnley
Gillingham
Huddersfield Town
Port Vale
Stockport County
Oxford United
Reading
Southend United
Crewe Alexandra
Grimsby Town
Oldham Athletic
Walsall
Swindon Town
Luton Town
Bury
.(1)
Real
Position
2
3
4
6
7
8
8
11
12
13
13
14
14
14
15
15
20
20
20
21
21
22
22
22
22
23
25
27
27
28
29
30
30
30
32
32
32
33
34
34
34
35
35
37
37
38
38
38
38
39
39
40
41
41
42
.(2)
Max
Wins
0
0
1
1
0
1
2
6
3
1
8
11
4
2
12
1
10
2
2
17
23
38
7
31
12
22
11
25
6
32
18
20
44
6
5
41
41
28
41
30
21
4
41
34
20
45
45
45
4
42
45
31
45
45
45
.(3)
Max
Profit
0
0
5
5
2
6
11
25
16
6
29
32
20
13
33
8
31
14
14
37
40
44
27
43
33
40
32
41
25
43
37
39
45
24
23
44
44
42
45
42
39
18
44
43
39
45
45
45
18
45
45
42
45
45
45
Spanish LFP
Average
1994-2005
RealMadrid
Barcelona
Valencia
Celta
Deportivo
Athletic
Valladolid
RealSociedad
Mallorca
Malaga
Betis
Alaves
Espanyol
AtMadrid
Zaragoza
Oviedo
Racing
Sevilla
RayoVallecano
Villarreal
Tenerife
Recreativo
Sporting
LasPalmas
Salamanca
Getafe
Compostela
Numancia
Albacete
Levante
Lleida
Logrones
Leganes
Cordoba
Murcia
Hercules
.(4)
Real
Position
3
3
5
7
8
8
10
10
10
10
11
12
12
13
14
16
16
17
19
19
21
22
23
24
24
27
27
27
28
28
31
34
34
35
35
41
.(5)
Max
Wins
2
1
2
3
4
5
9
10
7
8
4
8
8
7
13
12
17
14
19
13
17
22
26
24
28
38
30
27
32
24
37
38
34
35
29
43
.(6)
Max
Profit
6
5
7
9
13
15
22
5
19
21
13
21
20
19
27
27
31
29
13
28
31
36
38
16
39
43
40
29
41
37
43
43
33
37
39
44
@
"
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,
2
)
&
Table A2. Deviations from the profit-maximizing and winmaximizing position.
English leagues
Spanish LFP
Variable
(pm - p)
(wm - p)
N
mean
36
36
36
((pm - p)^2)/N
sum
N
mean
8.92
55
5.42
-1.26
55
-5.26
36
((wm – p)^2)/N
Sum
96
55
111
18
55
145
(pm - p) is the difference between the profit-maximizing position and the real one.
(wm - p) subtracts instead the actual position from the win-maximizing (or zero-profit) position.
6
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