Analyzing the Performance of the English
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...
References: Aigner, D. J., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier
production function models
Audas, R., Dobson, S., & Goddard, J. (2000). Organizational performance and managerial turnover.
Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale
inefficiencies in data envelopment analysis
Barros, C. P. (2003). Incentive regulation and efficiency in sports organizational training activities. Sport
Management Review, 6(1), 33-52.
Barros, C. P., & Leach, S. (2005). Performance evaluation of the English Premier Football League with
data envelopment analysis (Working paper)
Barros, C. P.,&Santos, A. (2003). Productivity in sports organisational training activities:ADEAstudy.
Barros, C. P.,&Santos, A. (2005). Les relations entre performance sportive et la performance financière
dans le football: Application au cas du football Portugaise
Battese, G. E., & Coelli, T. J. (1988). Prediction of firm-level technical efficiencies with a generalized
frontier production function and panel data
Battese, G. E.,&Corra, G. S. (1977). Estimation of a production frontier model:With application to the
pastoral zone of eastern Australia
Charnes, A., Cooper,W.W.,&Rhodes, E. (1978). Measuring efficiency of decision-making units. European
Journal of Operational Research, 2, 429-444.
Coelli, T. J. (1996).A guide to Frontier version 4.1:A computer program for stochastic frontier and costs
function estimation (Working paper No
Downloaded from http://jse.sagepub.com at UNIV OF BIRMINGHAM on January 15, 2008
Cornes, R. (1992). Duality and modern economics. Cambridge, UK: Cambridge University Press.
Dawson, P., Dobson, S.,&Gerrard, B. (2000). Stochastic frontier and the temporal structure of managerial
efficiency in English soccer
Deloitte & Touche. (2004). Annual report of professional football finance. London.
Driffield, N., & Munday, M. (2001) Foreign manufacturing, regional agglomeration and technical efficiency
inUKindustries:Astochastic production frontier approach.Regional Studies, 35, 391-399.
El-Hodiri, M.,&Quirk, J. (1971). An economic model of professional sports leagues. Journal of Political
Economy, 79, 1302-1319.
Fare, R., Grosskopf, S., Yaisarwarng, S., Li, S., &Wang, Z. (1990) Productivity growth in Illinois electric
Farrell, M. J. (1957). The measurement of productive efficiency. Journal of the Royal Statistical Society,
Fizel, J. L., & D 'Itri, M. P. (1996). Estimating managerial efficiency: The case of college basketball
Fizel, J. L.,&D 'Itri, M. P. (1997). Managerial efficiency, managerial succession and organizational performance.
Forth, R.,&Quirk, J. (1995). Cross-subsidiation, incentives and outcomes in professional leagues. Journal
of Economic Literature, 33, 1265-1299.
Greene, W. H. (2003). Econometric analysis (5th ed.). Upper Saddle River, NJ: Prentice Hall.
Haas, D. J. (2003a). Financial efficiency in Major League Soccer. Journal of Sport Economics, 4(3),
Haas, D. J. (2003b). Productive efficiency of English Football Teams: A data envelopment approach.
Hadley, L., Poitras, M., Ruggiero, J.,&Knowles, S. (2000). Performance evaluation of National Football
Hoeffler, R. A.,&Payne, J. E. (1997). Measuring efficiency in the National Basketball Association. Economic
Letters, 55, 293-299.
Kumbhakar, S. C. (1987). Production frontiers and panel data: an application to U.S. Class 1 railroads.
Kumbhakar, S. C., & Lovell, C. A. K. (2000). Stochastic frontier analysis. Cambridge, UK: Cambridge
Meeusen, W., & Van den Broeck, J. (1977). Efficiency estimation from a Cobb-Douglas production
function with composed error
Porter, P.,&Scully, G.W. (1982). Measuring managerial efficiency: The case of baseball. Southern Economic
Journal, 48, 642-650.
Scully, G. W. (1994). Managerial efficiency and survivability in professional team sports. Managerial
and Decision Economics, 15, 403-411.
Zak, T. A., Huang, C. J.,&Siegfried, J. J. (1979) Production efficiency: The case of professional basketball.
Please join StudyMode to read the full document