Researchers led by the University of Southampton and Brunel University London set out to determine how the on-field and off-field performance of a football club is affected by the make-up of its senior leadership.
They found that men’s football teams owned and run by a few wealthy individuals perform best because they were able to prioritise on-field performance – their position in the league – over their off-field financial performance, but where teams don’t have the luxury of a wealthy owner, they tend to perform better on the pitch if they have a diverse leadership.
The researchers suggest the results could indicate that Financial Fair Play rules aren’t going far enough to level the playing field for elite clubs.
“Most football clubs are non-profit making businesses, so they’re in a dilemma as to whether they want to improve their financial performance or their non-financial performance – their off-field or on-field performance,” said Dr Ahmed Elamer, a senior lecturer in accounting at Brunel Business School. “We were looking at how the structure of football clubs, specifically the board structure, affects the performance of those clubs.”
The researchers found that where clubs had ‘CEO duality’ – the CEO is also the Chairperson of the Board of Directors – there is a positive relationship with on-field performance but not off-field performance, a likely consequence of those clubs being able to spend big on players whilst not having to overly concern themselves with turning a profit.
However, where clubs were not backed by super-rich owners, the researchers found that those clubs with a large board and a significant number of non-executive directors performed better on the field than clubs which favoured a smaller senior management team. They also found that having a higher percentage of foreigners and younger directors also had a positive relationship with on-field performance, whereas having a higher percentage of female directors did not have a significant effect on on-field performance.
The researchers did not find any relationship between bigger, diverse boards and financial performance.
Explaining this, Dr John Malagila, Lecturer in accounting at the University of Southampton who led the study said: “Given the current clubs’ on-field performance emphasis, it is not surprising that our findings show that non-executive directors in these clubs have a significant negative effect on clubs’ financial performance. However, this is contrary to the conventional understanding that non-executive directors, normally considered more independent in advising, monitoring and controlling the management team of an organisation than their executive colleagues, tend to improve financial performance in organisations.”
Overinvesting in on-field performance is an issue the UEFA Financial Fairplay Rules are attempting to address and researchers warn that it could cause severe long-term issues for the sustainability of traditionally owned and managed clubs.
“This overinvestment is driven by what we call the ‘sugar daddy’ financing model,” said Dr Elamer. “This results in huge issues, as a lot of chasing clubs now declare bankruptcy or end up in administration because they didn’t focus on their long-term sustainability and their financial performance. We need more initiatives to improve financial fair play.”
Dr Malagila concluded: “While the study indicates that female directors are not associated with improved club performance, this does not necessarily imply that female directors do not have a contribution to the future success of these clubs. What is needed, as suggested by our findings, is a fair balance on the emphasis between off- and on-field performance, which could unleash the potentials of female directors in these clubs.”
“All those involved – club owners, fans, board of directors and regulators – have a role to play in improving football clubs’ financial sustainability through, for example, careful scrutiny of the existing clubs’ financial policies.”
The paper – – was published by the International Journal of Finance and Economics.
