F.A. Premier League With
an Econometric Frontier Model
CARLOS PESTANA BARROS
Technical University of Lisbon
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). 391
AUTHORS'NOTE: 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 Gestão, Technical University of Lisbon, Rua Miguel Lupi, 20, 1249-078 Lisbon, Portugal: e-mail: Cbarros@iseg.utl.pt.
JOURNAL OF SPORTS ECONOMICS, Vol. 7 No. 4, November 2006 391407 DOI: 10.1177/1527002505276715
© 2006 Sage Publications
© 2006 SAGE Publications. All rights reserved. Not for commercial use or unauthorized distribution. Downloaded from http://jse.sagepub.com at UNIV OF BIRMINGHAM on January 15, 2008 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 federation's (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 Europe's 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...