The UEFA Financial Fair Play Regulations: And its effect on Danish football clubs

Christoffer Sodemann

Student thesis: Master thesis

Abstract

In this thesis, the UEFA Financial Fair Play (FFP) regulations and the annual reports of the clubs participating in the Danish Superliga have been studied. The purpose has been to compare the clubs’ current finances with the coming FFP requirements, and determine the impact that these new regulations will have on competitive scenario and strategic behavior of Danish football clubs. The FFP will be enforced from the beginning of the 2013/2014 season. Compliance will be based on a two year monitoring period covering two reporting periods of 2012 and 2013. Since reports covering these periods are not yet available, the most recent reports for each of the clubs have been retrieved. They served as empirical data in the analyses determining how the clubs’ current finances measure up to the coming FFP requirements. The requirements that this thesis has included in the analysis are the maximum aggregate break-even deficit of EUR 5 million, and the maximum net debt vs. total revenue ratio of 100%. The results show that six out of nine analyzed clubs would have breached one or both requirements, had compliance been based on the 2010 and 2011 seasons. After finding that the Financial Fair Play regulations are very likely to have an effect on Danish clubs, analyses were performed to evaluate the changes in competitive scenario and strategic behavior. This estimate was based on a study of the theoretical framework and economic incentives that shape the competitive incentives of European football clubs. Game theory is also used as an important tool in determining the clubs’ future behavior. This thesis concluded that the FFP regulations will force a shift in the clubs competitive behavior from a prior adherence to individual incentives, to future adherence to more collective incentives. The analysis revealed that clubs will have an increased incentive to invest in youth development and facilities. Regarding the competitive scenario, the conclusion is that the FFP regulations will limit high revenue clubs more than low revenue clubs. This is mainly due to the 5 million euro deficit limit which is the same for all European clubs. This will increase the competitive balance both domestic and international competitions. It is also estimated that transfer and wage budgets of Danish clubs will increase in competitiveness. This is due to the anticipation that the FFP will restrict high revenue clubs significantly more than low revenue clubs. The Danish league can be characterized as low revenue compared to other European leagues, and will therefore benefit competitively from the decreased amount of transfer sums chasing after high quality players.

EducationsMSocSc in Management of Creative Business Processes , (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages75