PhD, Associate Professor O.V. Litvishko¹
PhD, Associate Professor A.A. Aliev¹
PhD, Associate Professor A.V. Titovsky¹
PhD, Associate Professor E.A. Lubyshev^{1, 2
1}Plekhanov Russian University of Economics, Moscow
²Moscow City Pedagogical University, Moscow

Keywords: football industry, financial and economic management system analysis, efficiency, integral performance rates.

Background. Presently the national expert community acknowledges the need for an efficient professional sports financing and economic management system since the existing model dominated by the governmental budgetary and quasi-governmental sources largely fails to meet the new social standards, requirements and challenges. It may be beneficial in this context to have a variety of the sports financing and economic management models analyzed to find the most efficient one.

Objective of the study was to make a comparative analysis of the financial and economic management systems of the modern European Football Leagues to find the most efficient one.

Methods and structure of the study. The European Football Leagues subject to the comparative analysis herein were classified by the specific financing mechanisms. As far as the free market corporate businesses are concerned, their performance efficiency is rated mostly by their profitability – whilst the sports industries, with their emphasis on the social service dimension, are still in need of reliable and transparent performance indicators. Many studies in this field have offered different sets of performance rating criteria, with varied subjectively ranked contributions to the consolidated financial and economic performance rates. Based on the study of the relevant research literature with concern to the economic process in the modern sports industry and its strategic management issues, we developed a set of performance criteria applicable for the sports leagues’ financial and economic performance rating and analyzing purposes.

The corporate progress criteria found by the critical analysis may be classified into the following financial and economic performance rates: incomes; costs; capital structure; payroll to the total revenue ratio; net debt; equity to debt ratio; net profit and loss; and trade balance for transfers. These financial and economic performance rates, on the one hand, include the performance rates prioritized by UEFA [14] as indicative for the Football League financial situation; and on the other hand, make it possible to rate every football club management efficiency – to provide inclusive and comprehensive measures for the Football League financial and economic performance analyses.

The financial and economic performance rates need to be first of all weighted and ranked for the financial and economic performance efficiency analysis. Based on the uncertain multitudes theory, we used the Fishburne test that rates the weight criterion decrease versus the next criterion, with every index quantified as follows:

r_i = (2(N-i+1)) / ((N+1)*N),                                                  (1)

where i is the index number; ri is the specific value of each i-th index; and N is the total number of indices.

Based on the expert valuations of the financial and economic performance rates, we ranked the indices and their weight: see Table 1. Weights of the indices were factored in to produce an integral financial and economic performance index as follows [9]:

Ifp = ∑(rt *(∑rij*NDij))+∑(rt *(rij*NRij))+∑(rt *(rij*NSij))+∑(rt *(rij*NPij),       (2)  

where Ifp is the integral financial and economic performance rate of the football league; rt is the general weight of the i group of performance rates; rij - weight of specific index; NDij – “income” group standards; NRij - “cost” group standards; NSij - “capital structure” group standards; and NPij is the "efficiency rating" group standards. The financial and economic performance model uses a standard set of financial and economic performance indices weighted with account of their implied significance rate – to produce a consolidated financial and economic performance rate of the football league.

Results and discussion. We used formula 1 and expert valuations of the financial and economic performance criteria to rank and weight up the financial and economic performance rates: see Table 1.

Table 1. Ranked and weighted financial and economic performance rates

We used the above ranked and weighted financial and economic performance rates to calculate the integral (consolidated) financial and economic performance rates for the European Football Leagues: see Table 2.

Table 2. European Football Leagues ranked by their consolidated financial and economic performance rates (Ifp)

The English Premier League was ranked on top of the financial and economic performance and financial sustainability scales with its high payrolls making it possible to contract the best footballers, keep up the interest of supporters and generate great incomes from the sponsorship and broadcasting contracts. Ranked on top are also the Spanish, German and Italian Premier Leagues that are still less economically successful than the English Premier League although highly popular in their countries and the world over and, hence, generating significant cash flows for progress. Given of Figure 1 hereunder are the Premier League progress rates (highlighted ellipses) in a two-dimensional system. The English Premier League shows the best progress (green ellipse in quadrant 2000-250). Quadrant 1000-1500 indicates modest but stable progresses of the Spanish, German and Italian Premier Leagues. And the other Premier Leagues lag behind on the progress chart due to their limited resource on the target service markets.

Figure 1. European Football Leagues ranked by financial and economic performance progress, consolidated Ifp rate

It may be pertinent to consider, for the purposes of the study, correlations of the Football Leagues competitive and financial and economic performance elements. Given on Figure 2 hereunder are the competitive rankings (UEFA rankings for the 2015-2018 period) versus Ifp, with the correlation ratio computed using formula 4. The correlation ratio was found to be highest for a logarithmic dependence. Basic correlation between the two Ifp variables and the UEFA rankings for 2015-2018 was computed as follows:

                                                       Y = a lnx + b,                                                          (5)

where Y is the Football League competitive ranking to financial and economic performance correlation ratio; a – is the meaning/ elasticity) of the dependent variable; х – clubs’ financial performance; and b is the random variable.

Figure 2. UEFA competitive ranking to averaged Ifp correlation ratio

Given in Table 3 hereunder are the annual numerical UEFA competitive rankings to averaged Ifp correlation ratios.

Table 3. Annual UEFA competitive rankings to averaged Ifp correlation ratios

The above table demonstrates a close correlation between the UEFA competitive ranking and financial and economic performance – that is only natural since the football clubs incomes directly depend on their competitive activity and successes i.e. grow with the competitive progress. The above regression equations show that a 100% growth in the Ifp rate will result in the UEFA ranking going up 10 times on average. Influences of the analyzed variables may be rated more accurately using the elasticity ratio indicative of the actual correlation of a Football League competitive ranking with the Ifp rate. The elasticity ratio was estimated to vary within the range of 10-15 points – that means that a 1% variation in lfp rate will result in the UEFA ranking changing by at least 10%. This means that the financial performance rate (Ifp) is of special influence on the Football League ranking.

Conclusion. The English Premier League financial and economic performance analysis showed that the professional sports industry operates as a highly effective and profitable investment and advertising instrument with the potential high benefits both in the financial and image building domains, and with the relevant socio-economic progress aspects. These correlated financial and economic performance mechanisms in our country may be mobilized conditional on the significant growth of the private shareholding interests including households – that are known to account for 70-80% of the total revenues of the English Premier League clubs, with these interests largely protecting the clubs from the risks associated with the budgetary-only funding of the sports industry.

The study was sponsored by an internal grant financing under the ‘Research initiatives to expand the investment opportunities in the Russian professional sports’ Project implemented by Plekhanov Russian University of Economics.

References

1. Litvishko O.V., Vyprikov D.V., Lubyshev E.A. Financial and economic performance rating factors in national football industry. Teoriya i praktika fiz. kultury. 2019. No. 11. pp. 20-22.
2. Aliev A.A., et al. (2018) Predicting levels of innovation-led development as exemplified by state-owned oil company. Journal of Applied Economic Sciences, Volume XIII, Winter, 7(61): 1902 – 1907.
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5. Litvishko O., Veynberg R., Bodrov I. Investment potential of the football industry. Journal of Physical Education and Sport. 2019. 19 (4), No. 362, pp. 2390-2399.
6. Nie D., Panfilova E., Samusenkov V., Mikhaylov A. E-Learning Financing Models in Russia for Sustainable Development. Sustainability. 2020. 12(11), 4412.
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Corresponding author: vectorzola@mail.ru

Abstract

Objective of the study was to make a comparative analysis of the financial and economic management systems of the modern European Football Leagues to find the most efficient one.

Methods and structure of the study. The European Football Leagues subject to the comparative analysis herein were classified by the specific financing mechanisms. As far as free market corporate businesses are concerned, their performance efficiency is rated by mostly their profitability – whilst the sports industries, with their emphasis on the social service dimension, are still in need of reliable and transparent performance indicators. Many studies in this field have offered different sets of performance rating criteria, with varied subjectively ranked contributions to the consolidated performance rates. Based on analyses of the relevant research literature with concern to the economic processes in the modern sports industry and its strategic management issues, we developed a set of performance criteria applicable for the sports leagues’ economic progress rating and analyzing purposes.

Results and conclusion. The study showed that the professional sports industry operates (conditional on a competent management, particularly in the brand name/ club/ league promotion, advertizing, clientele building, human resourcing, investment and innovation activity supporting and other elements) as a highly effective and profitable investment and advertising instrument with the potential high benefits both in the financial and image building domains, and with the relevant socio-economic progress aspects. These correlated financial and economic performance mechanisms in our country may be mobilized conditional on the significant growth of the private shareholding interests including households – that are known to account for 70-80% of the total revenues of the European Premier Leagues clubs, with these interests largely protecting the clubs from the risks associated with the budgetary-only funding of the sports industry.