Economic and financial analysis of bankruptcy of football teams

Abstract

This chapter aims to show a different point of view on one of the most famous sports in the world: football. The objective is to present a perspective that not many people get to see or even know about, because it is not about which player scores more goals or which team gets more titles. The approach that we want to show is the financial and economic state of each team, meaning, for example, why can some teams invest a large amount of money in players and facilities and other teams cannot? Why are there teams that relegate their division to a lower one? Is it just because they do not afford their goals or is there something else? What is there behind these sports goals? Is football just a game? What economic and financial situation are Spanish football teams in? To give an answer to all of those questions, we have studied the CAMEL variables and ratios of 13 Spanish football corporations throughout the 2003-2012 period. The results show that the majority of the clubs cannot control their financial status, sometimes due to unrealistic goals and other times due to lack of management and financial control. It leads to an economic downturn which is also supported by the wrong distribution of TV rights. However, as it can be observed in this chapter, there is some good news for Spanish Football Teams. As this chapter shows, it is possible to control the financial status setting some limits and controlling the financial rates. Also, it is important to highlight that the Professional Football League is changing the distribution of TV rights, which will be distributed in a more equal way, which will reduce the big difference among incomes between the first positioned teams in the table and the last positioned teams. Also, UEFA is interested in this issue due to the high level of clubs that find themselves in a debt-ridden situation and will penalize the teams that did not accomplish their financial requirement, which can be read in this chapter.