Essay About Football Club Efficiency And English F.A. Premier League

Analysing The Performance Of The English Premier League
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Analyzing the Performance of the English
F.A. Premier League With
an Econometric Frontier Model
CARLOS PESTANA BARROS
Technical University of Lisbon
STEPHANIE LEACH
Imperial College London
This article uses an econometric frontier model to evaluate the performance of football
clubs present in the English F.A. Premier League from 1998-1999 to 2002-2003, combining
sport and financial variables. A stochastic Cobb-Douglas production frontier model is
used to generate football club efficiency scores.We conclude that the price of labour, the
price of capital players the price of capital stadium, points gained, attendance, and turnover
all play a major role in football efficiency and find that the efficiency scores are
mixed.
Keywords: England; Premier League; Cobb-Douglas frontiermodel; technical efficiency
In this article, we present an application of an econometric frontier model to the
analysis of two different measures of success in the English professional football
industry: sporting success and financial success. Using data on English Premier
League (also known as the Premiership) clubs obtained from the Deloitte&Touche
Annual Report on Professional Football Finance (2004), the article expands on previous
research by comparing the efficiency scores of the clubs with a stochastic
frontier model. Previous research on the efficiency of the Premier League has relied
on data envelopment analysis (DEA; Barros & Leach, 2005; Haas, 2003b).
AUTHORSNOTE: We thank two anonymous referees for the constructive and thoughtful comments
provided on an earlier draft of the article. Any remaining errors are those of the authors. Correspondence
concerning this article should be addressed to Carlos Pestana Barros, Instituto Superior de Economia e
GestДЈo, Technical University of Lisbon, Rua Miguel Lupi, 20, 1249-078 Lisbon, Portugal: e-mail:
[email protected].
JOURNAL OF SPORTS ECONOMICS, Vol. 7 No. 4, November 2006 391Ð-407
DOI: 10.1177/1527002505276715
Щ 2006 Sage Publications
Щ 2006 SAGE Publications. All rights reserved. Not for commercial use or unauthorized distribution.
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The motivation for the current research stems from several issues related to the
management of professional football in England: first, comprising 20 clubs, the
English Premier League is characterized above all by the power of finance and
commercialism.We can observe an uneven playing field in the Premier League, in
which the market leaders, in terms of turnover, appear to be virtually guaranteed of
sporting success, whereas a large number of the clubs are playing in subchampionships
of their own, with very different objectives from the few elite clubs. It is of
interest to consider what this means, in addition to howit has come about during the
past decade or so.
A second motivation, stemming from the previous point, is to consider the role
of the European football federations (UEFA) tournament in influencing English
clubs management strategies. The past decade has been marked at the European
level by a massive injection of prize money for teams qualifying to compete in the
revamped Champions League. A quota system is in place by which Europes most
powerful leagues (England, Spain, Italy, and Germany) have the right to up to four
clubs in the lucrative tournament every season. The significance of this is that an
English club in 4th place in the Premier League can reap rewards as great as the
national champions, if not greater, depending on its progress in Europe. Thus, for
the English elite clubs, the Premier League and the European Champions League
are twin “golden geese.”
Finally, exogenous shocks currently affect the Premier League, particularly evident
in the case of Chelsea FC, following the purchase of this club by the Russian
oil billionaire Roman Abramovich in June 2003. This has had the effect of breaking
the previous dual hegemony of Manchester United and Arsenal, in addition to
affecting the relative efficiency.
The article extends previous research on football efficiency, adopting a stochastic
frontier model, as Hoeffler and Payne (1997) and Dawson, Dobson, and Gerrard
(2000) did, to evaluate the technical efficiency of the English Premier League football
clubs, using a sample composed of those clubs that played in this league in all
of the seasons under analysis (1998-1999 to 2002-2003). This criterion ensures a
balanced panel data set, which is a prerequisite to obtain similar average scores