the financial performance of the greek football clubs

D.O.I: http:dx.doi.org/10.4127/ch.2010.0042

Panagiotis Dimitropoulos

Department of Sport Management, University of Peloponnese

Abstract

The aim of this paper is to analyze the financial perfor-mance of the football clubs participating within the first divi-sion of the Greek football league for a period of 14 years(1993 - 2006) and to propose specific actions that need to betaken by both managers and regulators in order to improvethe financial stability of the clubs. We perform financialanalysis of key accounting ratios extracted from the footballclub’s annual financial statements in order to explain theparticular causes of the recent financial crisis which charac-terizes the Greek professional football league. The analysisof the clubs’ annual financial statements revealed that theGreek football clubs are highly leveraged, have intense liq-uidity and profitability problems and face an increased dan-ger of financial distress, despite the increased amounts thatfootball clubs invested during 2005. The above mentionedcrisis can be attributed to aggregate financial mismanage-ment and political inefficiencies during the last fifteen years.The paper proposes specific actions that need to be takenby both managers and regulators in order to improve the fi-nancial stability of the clubs and the overall competitivenessof the Greek football league.

Key Words: Financial performance, Financial Analysis, FootballClubs, Greece.

XXOPHΓIA OPHΓIA – CHOREGIAHOREGIASport ManagementInternational Journal

SMIJ – VOL. 6, Number 1, 2010

Scientific Forum inSport Management

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Football today has evolved into a market, the main characteristic of whichis the investment of uncounted billions. Extravagant expenditure for transfers,astronomical sums for signing of contracts with footballers, disputes and bat-tles among sponsors to get ‘star’ footballers to promote and advertise theirproducts, endless negotiations to obtain a share of the TV rights, profession-al managers trying to find the model team for potential investors, piece to-gether the current soccer environment.

There are some indications with regard to the relationship between soccerand its economic consequences for the global economy. Certainly, the conse-quences are not as wide-ranging as those of a petroleum crisis in leading theeconomy out of a recess into a boom or vice-versa. One certain thing is thatthe impacts of a great soccer event are felt on an economy, even to a smallextent. ABN-AMRO investigates these impacts in its Soccernomics 2006 re-port on the occasion of the World Cup that took place recently in Germany.Data from the past show that the World Cup winning country enjoys, on av-erage, an extra bonus of 0.7 per cent in its economic growth rate. On the oth-er hand, the country whose team loses in a World Cup Final also loses an av-erage 0.3 per cent from its annual economic growth rate. Now, with regard tocompanies, the income of the 20 largest European football clubs reachedrecord levels in the period 2004/05, for the first time exceeding the barrier of3 billion euros (Source: Deloitte, Soccer Money League 2006). A 6 per centgrowth rate on an annual basis has been shown in the income of the football‘giants’ for the aforementioned period, exceeding many growth rates of othersignificant economic sectors. Thus, someone can argue that the football in-dustry remains a business activity that promotes the financial growth of indi-viduals that are closely involved with this sport and endorses the developmentof the national economy in total.

Sport organizations and football clubs in particular have experienced sev-eral faces in their organizational form. During the 1970s and early 1980sclubs adapted their organizational design to a more professional and bureau-cratic form moving away from the simply-structured and amateur-governedstyle of management. The transformation of football clubs from non-profit in-to profit-oriented organizations had radical consequences for the club’s posi-tion in the national, European and international sport market and in the man-ner which those companies were managed. Put it another way, issues thatwere irrelevant before the change needed special attention on the manager’sagenda since football clubs needed knowledge and experience in functionalareas (budgeting, financial management, professional scouting, legal services,etc) not covered until that time. The professionalism that characterizes foot-ball since the early 1980’s had a significant influence not only in the clubs re-lation with its environment (professional bodies, associations and leagues) butalso with both internal and external parties (professional players, technicalstaff, fans, media corporations, sponsors, etc). The football clubs (as public

6 SMIJ – VOL. 6, Number 1, 2010

limited companies) have to work in a strictly competitive environment, re-de-termine their position in the market and adjust their decision-making processon the new regulatory framework.

Kikulis et. al (1995) and Smith (2004) argue that this new organizationalreform required more technical and administrative expertise which pushed to-wards to more professional control over decision making challenging the val-ues that have influenced the functioning of these organizations since their ori-gin. Regarding the Greek football setting, Dimitropoulos (2006) documentsthat Greek football clubs experienced some important changes on their orga-nizational design especially in the late 1970s when the government passedspecific legislation (Law 789/1979) which aimed at establishing the sense ofprofessionalism in football. All the football clubs that were competing in themaster division of the national championship were transformed into profes-sional football clubs and received the title of the public limited companies. Inother words, professional football clubs are considered as companies wheretheir capital and assets are divided into shares held by the owners. The pro-fessional football clubs, under their new form, are being controlled and orga-nized according to the companies act law 2190/1920 (Regarding the organi-zation of the public limited companies) like any other domestic firm that hasthis specific capital form. This new organizational design required more tech-nical and administrative expertise, formal roles, rules and programs within theorganization and all decisions started to be decentralized to the professionalstaff (see also Kikulis et. al, 1992).

When this radical change on the organizational design of professional foot-ball clubs took place, someone could argue that the new framework could pro-vide managers the necessary impetus for introducing the dimension of efficien-cy on both off-field and on-field managerial decisions. However, recent researchon the financial stability and viability of football clubs on European level, pre-sent strong evidence of a common set of problems which impact on the eco-nomic performance and stability of football clubs in the major European leagues.As Lago et. al (2006) argue, there are two kind of evidence that indicate thepossibility of financial instability within European football and those are the im-balance between income and expenses and the evidence of debt increases.Overall, football clubs within the most important and well-organized leagues asin Spain, France and Germany and in other European countries have limitedabilities to maximize profits since the opportunities to mask profits is limited andthe philosophy of management is different compared to the US.

In Greece, with the exception of 2004, when the Greek national team wonthe European Cup, no significant achievements have been recorded on an in-dividual club basis. The Greek national league is a medium-sized league, withlow budget football clubs which are mostly locally and not internationally ori-ented. This means that their viability is mainly supported by the local com-munity or by a few wealthy businessmen who are willing to invest in the

THE FINANCIAL PERFORMANCE OF THE GREEK FOOTBALL CLUBS 7

sport. Even if their intentions are positive towards the enhancement of aclub’s financial and athletic status, there are many cases of financial mis-management (lack of budgetary policy and enforcement, managerial instabili-ty and even fraudulent behavior on behalf of some managers) which some-times resulted into severe financial instability and mere insolvency. This isprobably the main reason why the overwhelming majority of the teams appearto be in difficult financial straits, having accumulated great losses. Bosca et.al (2008), Lago (2006), Ascari and Gagnepain (2006), Frick and Prinz (2006),Barros (2006) and Dimitropoulos (2009) are some studies which indicate thesize of financial instability which characterizes football clubs and leaguesacross Europe, however none of them has addressed the issue of clubs’ eco-nomic crisis in conjunction to the radical changes that took place on the foot-ball setting of each country during the past decades.

The main aim of this paper is to extend the work of Dimitropoulos (2009)by analyzing the financial performance of the football clubs participating withinthe first division of the football league for a period of 14 years (1993-2006)and to propose specific actions that need to be taken by both managers andregulators in order to improve the financial stability of the clubs. According toour knowledge this study is the first within the Greek sport setting which ana-lyzes the financial performance of the football clubs, therefore this study addsto a growing body of research on sports finance and specifically on the orga-nizational changes that need to done in order to enhance the managerial effi-ciency of these organizations. The present paper could be proved useful toboth managers and regulators since it has implications for those related par-ties. This paper provides an impetus for football managers to add on their day-to-day agenda the issues of economic efficiency and maximization beyond thatof athletic success. As for regulators, they must comprehend the importance offinancial performance for achieving a vibrant and competitive championship andthis paper can provide constructive directions on achieving this goal.

The remainder of the paper is organized as follows: The next section pre-sents a discussion on the relevant literature that exists about this topic in Eu-ropean level followed by a short overview of the relevant regulatory framework.Section 4 contains the data selection procedure and presents the methodolog-ical framework of the paper. The fifth section contains an analysis of the fi-nancial performance of the Greek football clubs, while the last section includesa discussion and policy implications for sport managers and regulators.

Literature Review

There is a series of research papers on the issue of football clubs finan-cial performance in European level which present evidence of an intense fi-nancial crisis that characterizes the majority of football clubs within the major


European football leagues. García and Rodríguez (2003) were the pioneer au-thors in analyzing the financial structure of professional football (focusing inthe Spanish football league). They concluded that for some clubs it would bedifficult to survive in professional football in Spain since those clubs had tochange their balance sheet composition to survive because they could notmaintain equilibrium based in almost 60 per cent intangible assets. Also, De-loitte’s annual report (2004) compared the financial conduct of various Euro-pean football leagues, arguing that the financial crisis affects most Europeanteams, although to a different extent.

Ascari and Gagnepain (2006) by performing a financial analysis of the LFP(Spanish League) first and second division football clubs found that the Span-ish football industry suffers from some structural weakness in its accounts. Be-ing more specific, TV revenues are not growing as fast compared to previousyears, the depreciation rates are diminishing the clubs’ profitability and the bal-ance sheet is structured on a risky balance between assets and liabilities. Allthese facts render the profit making ability of the Spanish football clubs lead-ing into intense financial problems. However, the whole situation is less severecompared to other European leagues since in Spain public authorities and lo-cal economic forces have strong incentives to back up football clubs.

Furthermore, evidence by Bosca et. al (2008) in the Spanish footballleague suggest that a lack of accounting transparency hides the financial cri-sis and this creates an important fragility on the economic situation of Span-ish football clubs since there seems to be a permanent difference betweenrevenues and expenses that affects almost all clubs, small, medium and big-sized. The most indicative sign of the disequilibrium between revenues andexpenses is the fact that many clubs have engaged in the sale of fixed assetsin order to finance the deficits incurred by sport activities.

Baroncelli and Lago (2006) corroborate the aforementioned findings of As-cari and Gagnepain (2006) and Bosca et. al (2008) within the Italian league.They document that despite the initial growth of Italian football (boosted bythe entrance of pay TV into the business) at the beginning of the millennium,the Italian football clubs have recently sunk into a deep financial crisis whichresulted in the bankruptcy of several football clubs and in the downsizing ofothers. As they point out, at the end of the 2002-2003 season the total netloss for Serie A was more that 400 million euro, more that one third of totalrevenue.

Under the aforementioned framework, Buraimo et. al (2006) argue that fi-nancial distress is not an infrequent phenomenon in English football as wellsince the number of clubs that fall into financial difficulties has increased overthe years. The authors document that the main causes of this crisis are the in-sufficient revenue growing ability of football clubs, the loss of revenue from rel-egation, the excessive wage costs and the inability of the clubs to adapt play-er wage contracts when they are downsized into lower divisions. Additionally,


relative results were found by Barros (2006) in the Portuguese football league.In Portugal a very small number of football clubs has the ability to generateprofits in their annual accounts but as the author argues these are the excep-tion and not the rule. Barros (2006) declares that the financial instability offootball clubs in Portugal is originated to the inadequate state policy, the smalldimension of Portuguese clubs and the inefficient management.

Additionally, Frick and Prinz (2006) by examining financial data of the Ger-man “Bundesliga” football clubs, document an improved financial situationcompared to the other European leagues. In the German league the aggre-gated liabilities are the half compared to Spain, England and Italy, fan atten-dance is quite high and still rising and revenues from sponsors are the high-est in Europe. However, TV revenues seem to present a significant declinedue to the insolvency of Kirch group.

Finally, a recent paper by Dimitropoulos (2009) examined the factors thathave a significant impact in the profitability of the Greek football clubs overthe period 1994-2004. He argues that football clubs in Greece suffer from se-vere losses, are highly leveraged and present negative returns on equity andassets. The main finding is that the profitability of football clubs is directly as-sociated to their short run success on the field which suggests that negativefinancial results deteriorate the athletic performance of the clubs. Conse-quently, football clubs cannot pursuit the maximization of their athletic perfor-mance without taking into consideration the financial performance as well,since both are inter-connected and highly correlated.

Thus, in total we can argue that the football industry in Europe is charac-terized by an intense financial instability. The causes are different from onecountry to another but the common reasons for the aforementioned situationare the clubs’ inability to generate profits and the severe mismanagement.Even though, the aforementioned studies verify the financial unrest that char-acterizes the majority of football clubs across Europe, none has addressed theissue of managerial changes that have to be done in order to overcome thisinstability. Mutually all studies argue that European football clubs invest moreon their athletic success regardless of their financial position (profits and cap-ital). This view, even if it has a logic background of support, its practically my-opic since football clubs today have transformed to public limited companiesturning their traditional template into a template of a profit oriented organiza-tion. As Dimitropoulos (2009) argues, athletic success and financial successcannot walk on separate ways. Even if this is the case, athletic success hasan expiration date and cannot be achieved in expense of financial stability.Therefore, football managers need to add the perspectives of profitability andeconomic efficiency on their day-to-day agenda (beyond athletic success) andin order to achieve that they must be willing to adhere organizational changestowards this goal.


Regulatory Framework

Football is certainly the most popular sport in all European countries andin Greece as well. As Dimitropoulos (2006) argues the organizational form ofthe sport passed several faces until its recent professional structure. InGreece the intense interest of the public and the government as well, for thecreation of a legislative framework for the administration of football, begun atthe start of the 20th century. By that time the first football clubs started tomake their appearance but their presence is strictly local and of course ama-teur and their organizational structure resembles the “kitchen table” archetypewhich is characterized by roles based on interest and loyalty, little strategicplanning and the decision making process been made by volunteers (seeKikulis et. al, 1995). Through the years the increased interest of the govern-ment on this matter resulted in more intense efforts to improve the afore-mentioned framework. The international aspects of this sport, which createsdevelopment opportunities for the clubs (such as the participation in Europeanand international championships and events) and some obligations that theclubs had to fulfil, made football an important issue in the political agenda.The aim of the government was to force football clubs to operate and com-pete into a new professional environment in order to become a part of the in-ternational advancements.Τhe first step on that direction was made in 1979 and specifically with thevoting of the Law 789/1979. By this means the sense of professionalism wasestablished in the Greek football setting. All football clubs that were compet-ing in the master division of the national championship were transformed intoprofessional football clubs and received the title of the public limited compa-nies “S.A.” which comes from the French words “Societe Anonyme” and de-clines the capital form of the firm. The professional football clubs, under theirnew form, are being controlled and organized according to the companies actlaw 2190/1920 (regarding the organization of the public limited companies)like any other domestic firm that has this specific capital form. Despite the ini-tial law in 1979, many alterations took place in the forthcoming years andspecifically in 1991 (Law 1958/1991) and also in 1999 (Law 2725/1999)where professionalism was introduced in other sports as well, beyond football.By these means the government wanted to create a fair financial and opera-tional framework under which the football clubs would operate with commonorganizational, financial and tax administration rules. By that time the organi-zational design of the football clubs was passed from the “kitchen table” or-ganizational archetype (prior to 1979) to the “boardroom” and “executive of-fice” archetypes which are characterized by a shift to professionalism in allaspects of management including staff, expertise, planning and decision mak-ing (see also Kikulis et. al, 1992 for additional details).


Greek football clubs today present many common characteristics with otherEuropean clubs like Spanish, Italian and German. First of all they care most-ly for their ranking in the table of the national league and less for their prof-its, a fact which has a negative impact on their financial performance (see theprevious section for more details). A recent paper by Dimitropoulos (2009) in-dicates that a club’s profit making ability is closely connected to its athleticperformance suggesting that intense losses result into poor on-field perfor-mance. Moreover, Greek clubs do not fulfill the Hellenic’s Capital Market Com-mission prerequisites for entrance in the stock market, a fact which limits theirabilities for external financing. Thus the remaining financial resources arethose of the state and some individual investors which have close emotionalconnections with the clubs. Another interesting characteristic of the Greekfootball industry is the local and cultural pride of some clubs which results in-to close social ties with the fans and the local community. This fact actuallymeans that when a local football club faces the risk of insolvency then the lo-cal community is making efforts to support the club politically and financiallypostponing the inevitable. Thus, insolvency is not an option at least within theclubs in the first division of the league. However, when a club’s financial dis-tress reaches irreversible levels I do not believe that the on-field performanceor the efforts of the local community will be enough to sustain its future via-bility. Therefore, football managers’ myopic attention on the athletic perfor-mance needs to be re-oriented on financial viability as well. Professional soccer in Greece is governed by the rules and provisions en-forced by the Ministry of Development. The competent body for the supervi-sion and observance of the regulatory framework as well as the smooth run-ning of the Super League (the 1st division) is the Hellenic FootballFederation. The main objectives of the Hellenic Football Federation are thecontinuous evolvement of Greek football, the improvement of the athletic per-formance of the Greek national team, to sustain the publicity of football as themost famous sport in the country, to organize a well-established and compet-itive championship and finally the financial growth of the sport through the ex-pansion of its economic and commercial standards. After 2003, and in response to the innumerable irregularities ascertained in thissector, a new inspection body was established in the form of the ProfessionalAthletics Committee, which is an independent authority, the main inspector andprincipal guarantor of transparency and legality in the field of professional ath-letics. The football clubs in Greece have financial and administrative indepen-dence. They keep minute-books of the decisions of the boards of directors andthird class accounting books as being determined by the Greek Code for Ac-counting Books and Records and draw up a budget and balance sheet. Rela-tive to the clubs of the German “Bundesliga”, the Greek Football Clubs areobliged to submit to the Professional Athletics Committee, at least 15 days be-fore the season begins, an income and expense budget for the new season,


balanced and verified by at least one certified public accountant. Nevertheless,significant problems with regard to the mismanagement of club finances haveremained unsolved for decades. Thus, in accordance with recent data, the ac-cumulated accounting losses have exceeded the share capital of the AthleticFootball Clubs and their operation should normally have been curtailed. How-ever, the paradox is that, with the tolerance of the authorities and under thelegal shield provided by ARTICLE 44, LAW 1892/90, soccer teams continue tocompete in the championships, while their debts are either prescribed or set-tled by long-term installments which run the risk of never being collected.Certainly, there is no uniform Community legislation to determine what shouldbe applied in every European football league. Each country has its own fed-eration that determines its own rules and penalties in cases of debt. Thestrictest countries in respect of debts are France, Italy, Austria, Denmark,Hungary and Switzerland. More specifically, in Italy when the debt of an Ath-letic Football Club exceeds a specific amount, the team is relegated to a low-er division. In Switzerland, when a soccer team has debts, it is deprived of itsprofessional status and is relegated to the 1st amateur division. In Spain, acase of relegation due to debts has never been recorded. In England, a teamthat has debts loses ten points until they have been settled (which rarely hap-pens more than twice in one team, since it is ultimately deprived of its pro-fessional status if it does not comply with the regulation). In any case, thecurrent situation in Greece favors the phenomenon that the majority of teams,either to a large or small extent, show fictitious debt, which at all events issettled by the State, in order to avoid political costs.

Data Selection and Methodology

The research sample comprises data from 17 Football Clubs that have par-ticipated at least one year on the 1st division of the Greek Football Leagueover the period 1993-2006. The main criteria that each club must fulfill in or-der to be included in the sample is to have full financial data published intheir annual financial statements (audited by a certified chartered accountant)and to close their fiscal year on June. Specifically, we extracted data regard-ing clubs’ net income, total assets, shareholder’s equity, net sales, total debt,cash flows and receivables. The research sample is restricted only in theclubs of the 1st division since those attract greater publicity and have in-creased chances for external financing. We have excluded clubs participatingin lower divisions because their financial statements lack of reliability sincethey are not permanently audited by certified chartered accountants. Addi-tionally, another reason for selecting clubs in the first division is because themajority of those clubs is oriented in major capital cities including AthensThessalonica and Partas among others, thus presenting a vast and stable funloyalty base compared to clubs participating in lower divisions. All data were


selected from the ICAP group database and our research period ends at 2006since we wanted to examine how the success of the Greek national team inthe European championship in June 2004 could affect the financial results ofthe football clubs in the subsequent years. No further trimming was conduct-ed since we did not want to lose observations and induce bias in the finaloutcome. The following table 1 presents the sample selection procedure.

Table 1. Sample selection procedure

Football clubs included in the ICAP database 25Less: Clubs with incomplete accounting data (5)Non-financial firms with full stock price and accounting data 20Less: Non-June fiscal year end clubs (3)Football clubs inclded in the final sample 17

As it was discussed in previous sections, the aim of this study is to per-form an analysis of the financial performance of the Greek football clubs andto assess the overall economic effectiveness of the professional footballleague. For this reason some key financial ratios were estimated from eachclub’s annual financial statements and analyzed annually and on a pooledsample basis, controlling for liquidity, profitability, long term solvency and cashflow adequacy. Being more specific, in order to appraise football clubs’ liquid-ity the current (current assets / current liabilities) and quick [(cash + mar-ketable securities + receivables)/current liabilities] ratios were estimated so asto evaluate the clubs’ ability to pay bills and to meet unexpected needs forcash. Moreover, profitability is the most crucial goal of every business activi-ty since it reflects the ability of each football club to earn a satisfactory in-come which will ensure its future viability. Profitability is closely related to liq-uidity since earnings ultimately produce cash flows. For this reason weestimated the ratios of asset turnover as net sales to total assets, net profitmargin as net income to sales, return on assets as net income to total assetsand return on equity as net income to shareholders equity.

Additionally, long term solvency has to do with the ability of a football clubto survive for many years. Increasing amounts of debt in a club’s capital struc-ture means that the company is becoming more heavily leveraged. This factpractically means that the club’s legal obligations to pay interests periodicallyand the principal at maturity are increasing thus raising the risk of insolven-cy. Consequently, creditors and stakeholders evaluate the clubs long term sol-vency in order to track possible signs of financial distress. Following theaforementioned discussion we estimated the ratio of debt to equity so as tomeasure the clubs capital structure and leverage.


Finally, the last performance evaluation measure that is included in theanalysis is the cash flow adequacy. Cash flows are deemed important for foot-ball clubs since they are needed to pay debts when they are due and for thisreason they are closely related to liquidity and long term solvency of theclubs. The measure of cash flow adequacy used in the analysis is the ratio ofcash flow to sales and provides an indicator of the club’s ability to generatecash from its sales. In total, the aforementioned analysis will provide a clearpicture of the football clubs financial performance and will highlight problem-atic areas that require corrective actions on behalf of the clubs’ managers.

Financial Analysis and Results

In the first part of the financial performance evaluation, I consider theprogress of key accounting data and financial ratios of the Greek footballleague on a year-to-year basis. Table 2 presents the evolution of some fun-damental financial data extracted from all football clubs’ annual financial state-ments. The overall picture suggests that Greek football clubs are more per-formance seekers and not profit maximizers, a fact which is also evident inSpain and Portugal (Ascari and Gagnepain, 2006; Barros, 2006). Being morespecific, even though the general tendency of total assets and shareholdersequity is increasing indicating that sufficient funds have flown into the footballclubs, managers are not able to generate profits.

Total assets present a stable increase from 2.8 million euro in 1993 to 20million in 2004 and a magnificent boost up to 96 million in 2006. This largeincrease in total assets after 2004 can be attributed to the achievement of theGreek national team in the Euro Cup of Portugal which seems to generate aninvestment wave on the football industry. The interest of the public, manag-er’s and the state’s on football organization and funding was suddenly reim-bursed in order to pursue real benefits for individual clubs and for the pro-fessional football league in total (Excess funding, advertising, TV broadcastingrights, greater match attendance, fun loyalty and so on). The same stands forshareholders equity and fixed assets were in 1993 their mean level was up to1.3 and 1.8 million euro respectively reaching a tenfold increase of 11.4 and13.3 million euro respectively in 2004 and a further improvement by 152.8and 77.9 million in 2006. These results present a significant increase on theimportance that football has received over the years in the local market andthe evolvement of this sport to a crucial business activity (especially after the2004 Euro Cup). However, the benefits that someone can receive from in-vesting in the football industry in Greece are quite vague.

Even though the amounts of sales and cash flows present an increaseover the years (net sales have increased from 1.04 million in 1993 to 72.1million in 2006 and the cash flows present an even greater raise ranging from


0.6 million in 1993 to 5 million euro in 2002 followed by a downturn of 0.45million in 2006) this does not result into an improvement on the final outcome.The levels of gross, operating and net profit over the years are quite disap-pointing if we consider that in the whole period of investigation not only prof-its have “surrendered” their position to losses, but also with an increasingpace (with the only exception in 2005 where the net income was 51.3 millioneuro). Net losses range from 0.1 million in 1993 to 6.8 million in 2003 and29.3 million in 2006. The only profitable year for the Greek football leaguewas in 2005 (after the Euro Cup competition) which proved to be the criticalpoint for the football industry since the investments that football clubs fi-nanced seem to prosper for that year. However, in 2006 the situation was re-versed suggesting that managers are unable to extrapolate any benefits fromfunds flowing in the football clubs from both investors and fans and to renderthe club’s expenditure into an affordable level (total debt presents also a hugeincrease from 23.3 million in 2004 to 172 million in 2006). This behavior ac-tually contradicts the basic business principle of profit maximization followedby cost minimization. Whether the aforementioned situation is discretionary ornot is a question for future research.

Table 2. Evolution of key accounting data of the Greek football leagueover the period from 1993 to 2004 (amounts in million euros)

YearsFixed Total Shareholders Short-team Total

Net salesCross Operating Net

Cash flowsassets assets equity debt dept profit profit profit

1993 1.778 2.803 1.388 3.683 3.889 1.049 – 0.776 – 0.408 – 0.165 0.589

1994 2.221 3.591 2.274 4.377 4.570 1.286 – 0.603 – 0.410 – 0.603 0.462

1995 2.407 3.622 2.426 4.743 4.868 1.363 – 0.666 – 0.396 – 0.544 1.116

1996 2.104 3.224 2.629 3.533 3.646 1.463 – 0.981 – 0.555 – 0.490 0.169

1997 2.911 4.151 3.038 4.679 5.112 1.745 – 1.274 – 0.608 – 0.423 1.477

1998 3.103 4.385 3.321 6.326 7.003 1.940 – 1.594 – 0.964 – 1.236 2.322

1999 3.834 5.464 4.384 7.935 8.609 2.093 – 3.194 – 2.078 – 2.067 1.890

2000 9.088 13.707 7.542 14.864 16.316 2.907 – 3.971 – 3.463 – 4.119 5.463

2001 13.114 18.142 8.328 18.392 22.318 4.266 – 5.556 – 4.581 – 4.552 5.400

2002 14.177 22.896 11.478 21.597 25.469 7.352 – 3.800 – 1.038 – 1.862 5.250

2003 8.799 12.592 12.142 17.487 21.271 3.723 – 6.703 – 5.077 – 6.842 3.920

2004 13.393 20.123 11.421 19.897 23.381 3.205 – 4.696 – 2.382 – 3.357 3.196

2005 31.410 74.690 138.150 150.900 155.770 73.210 6.500 1.250 51.350 – 0.110

2006 77.970 95.790 152.800 169.920 172.020 72.180 – 3.580 – 3.010 – 29.350 0.450

Sample comprises 17 Football Clubs that have participated at least once on the 1st division

of the Greek Football League over the period 1993-2004. The table contains the evolution of the

key accounting data of the football league estimated as the mean values of the accounting vari-

ables extracted from all club’s annual financial statements.


Furthermore, the following Table 3 presents a yearly analysis of some keyfinancial ratios of the Greek football league. The analysis is quite evocativeregarding the actual levels of profitability presented in the previous table. Theasset turnover is below unity in all years under investigation and gradually di-minishing between 1993 and 2004 presenting a slight increase in 2005 (0.41)and a downfall again in 2006. This actually suggests that football clubs are in-capable to generate sales from their assets, indicating inefficient management.The ratios of return on assets, return on equity and net profit margin are allnegative providing supportive evidence of the diminishing profitability thatworsens the football clubs financial position (the only exception again existsin 2005 where the net profit margin was positive and up to 70 per cent).These results corroborate relative findings of previous studies on this issuewhich suggest that European football clubs are more performance maximizersthan profit maximizers (Barros, 2006).

Table 3. Evolution of key accounting data of the Greek football leagueover the period from 1993 to 2004 (amounts in million euros)

YearsAsset

ROA ROENet profit Equity to Debt to Current Quick Cash flow

Turnover margin assets equity ratio ratio to sales

1993 0.495 – 0.148 – 0.204 – 17.723 0.368 1.621 0.347 0.301 0.562

1994 0.684 – 0.298 – 0.233 – 31.028 0.263 14.497 0.364 0.297 0.073

1995 0.656 – 0.870 – 0.409 – 29.166 0.317 0.461 0.362 0.3 1.208

1996 0.588 – 0.343 – 0.122 – 37.328 1.374 3.385 0.581 0.560 0.066

1997 0.567 – 0.108 – 0.062 – 12.954 0.684 0.97 0.277 0.41 1.095

1998 0.529 – 0.150 – 0.586 – 33.684 0.137 1.220 0.256 0.213 2.306

1999 0.468 – 0.234 – 0.304 – 51.785 2.399 1.123 0.41 0.370 1.599

2000 0.280 – 0.257 – 0.545 – 76.359 0.344 30.720 0.45 0.332 1.992

2001 0.350 – 0.30 – 0.550 – 81.025 0.256 2.828 0.383 0.3 2.375

2002 0.309 – 0.123 – 0.148 – 25.075 0.244 10.850 0.48 0.342 2.802

2003 0.360 – 0.395 – 0.477 – 66.529 0.185 0.054 0.375 0.325 2.779

2004 0.302 – 0.125 – 2.103 – 37.726 3.004 – 6.902 0.838 1.479 1.983

2005 0.419 – 0.114 – 0.259 0.701 0.791 1.127 0.49 0.49 – 0.002

2006 0.368 – 0.271 – 0.371 – 0.407 9.677 1.125 0.52 0.50 0.006


of the Greek Football League over the period 1993-2004. The table contains the evolution of the

key financial ratios of the football league estimated as the mean values of the accounting vari-

ables extracted from all club’s annual financial statements. Asset turnover is defined as the ratio

of net sales over total assets, ROA is the ratio of net income to total assets, ROE is the ratio of

net income to shareholders’ equity, Net profit margin is the ratio of net income to net sales, Eq-

uity to assets is the ratio of shareholders equity to total assets, Debt to equity is the ratio of to-

tal liabilities to shareholders equity, Current ratio is the ratio of current assets to current liabili-

ties, Quick ratio is the ratio of cash + marketable securities + receivables to current liabilities,

Cash flow to sales is the ratio of operating cash flows to net sales.


Additionally, in terms of liquidity the current and quick ratios are both be-low unity indicating that Greek football clubs are unable to cover their currentliabilities from their current assets, a fact which can create severe problemsin their daily operations. Finally regarding the capital structure of the Greekfootball clubs, it is heavily based on external financing as the ratio of debt toequity reveals. Specifically, in 2000 and 2002 debt covered 30 and 10 timesrespectively the level of shareholders equity a fact which can have a seriousimpact on the future viability of the clubs and the professional football leaguein total. However, in 2005 and 2006 the situation seem to be improved sincethe debt is slightly above unity suggesting that clubs try to finance their ac-tivities mainly through their own resources and not from external financing.

Based on the aforementioned discussion it is accurate to say that theGreek professional football league during the last decade presents a devas-tating financial performance in terms of profitability, liquidity as well as fi-nancing and solvency with the only exception being present in 2005. It seemsthat the Greek football clubs were able to capitalize in part the success of theGreek National team in the Euro Cup but they proved incapable to sustainthese benefits for the upcoming year. Huge amounts were invested in the pro-fessional football league but the returns seem to deteriorate in 2006 puttingclubs into a worse financial position compared to the pre-2004 era. In Greecethe professional football league is actually dominated by three major footballclubs (Olympiacos, Panathinaikos and AEK all of them located in Athens)which distinguish in terms of financial performance and athletic success. Thisstatement becomes even more convincing if we consider that the only coun-tryside team which won the championship within the last two decades wasLarisa FC in 1987.

Regarding the economic dimension of football clubs in Greece, data onTable 4 is quite revealing. As we can see among 17 football clubs AEK,Olympiakos and Panathinaikos are the top three teams concerning the levelof assets, shareholders equity, net sales and cash flows. The aggregate lev-el of assets, sales and cash flows of the aforementioned three teams exceedsthat of the other fourteen teams by 1.67, 1.12 and 1.0 times respectively.This practically means that poorer teams will be less able to bid for star play-ers and new talents compared to the three dominant teams (since these play-ers are more attracted by the most successful teams), thus they will probablyhave less chances to equally content the championship, resulting into a de-creased competitiveness of the overall league.

However, the data regarding profitability is controversial. The only teamswithout losses during the whole period of investigation were Ionikos, SkodaXanthi, Aigaleo and Kallithea and even the top three teams (Olympiakos,Panathinaikos and AEK) suffered from severe losses. Being more specific, themean level of net sales (2.8 million euros) is quite equal to the level of gross


loss (2.9 million euros) meaning that professional football teams do notachieve a higher return on the cash flows they decide to invest on the sport.Put it another way, the money that football teams pay relative to the cost ofgoods sold is doubled compared to the sales they generate. Someone couldattribute the aforementioned fact to two possible reasons the first being thatdespite the fact the top three teams have increased cash flows and assetscompared to the other teams, they seem to have inadequate managementand a limited ability to generate profit streams. The second and the mostprobable reason is the management’s orientation towards athletic maximiza-tion irrespective of the financial returns that clubs actually generate on a year-to-year basis. On the contrary small clubs seem to be less able to invest hugesums of money on the sport thus following a more conservative policy towardsathletic maximization compared to their larger counterparts, a fact which leadsinto higher levels of profitability.

Table 4. Key accounting data of the Greek football clubs for the period1993-2006 (amounts in million euros)

ClubsFixed Total Equity Short - term Total Net Cross Operating Net Cash

assets assets debt debt sales profit profit profit flows

AEK 14.614 22.310 7.439 1.278 47.548 42.772 – 5.542 – 4.855 – 8.759 8.556

Aris 3.779 5.265 10.564 3.501 6.662 6.650 – 3.295 – 3.591 – 3.317 0.958

Iraklis 4.479 6.262 5.089 0.436 7.022 6.994 – 1.638 – 1.197 – 1.489 1.626

Ionikos 1.142 3.894 0.730 0.134 3.847 3.840 – 1.660 0.070 0.045 0.961

Olympiacos 23.130 35.978 23.748 2.602 44.449 37.350 – 11.000 – 7.228 – 7.755 4.966

Panathinaikos 15.968 20.427 9.838 6.152 15.002 11.769 – 4.206 – 2.493 – 2.452 4.994

Panahaiki 0.934 2.673 0.603 0.288 4.392 4.254 – 0.951 – 0.199 – 0.155 0.920

PAOK 6.994 9.249 7.175 1.458 9.400 7.051 – 2.368 – 2.420 – 2.282 4.529

Pas Giannena 0.686 0.775 2.347 0.338 4.669 4.669 – 0.637 – 0.422 – 0.770 1.140

Skoda Xanthi 3.094 3.927 1.804 0.134 2.605 1.739 – 1.004 0.133 0.016 1.481

Proodeutiki 0.333 0.873 1.467 0.108 2.565 1.889 – 0.502 – 0.062 – 0.135 0.156

Kalamata 2.969 4.272 2.977 0.143 3.738 2.862 – 1.620 – 0.714 – 0.317 0.565

Panileiakos 0.690 1.468 0.581 0.021 1.172 1.172 – 1.802 – 0.153 – 0.156 1.276

Kallithea 1.188 1.876 0.603 0.012 1.045 1.045 0.354 0.600 0.588 1.243

Ethnikos 0.792 1.261 0.532 0.292 0.858 0.858 – 0.799 – 0.091 – 0.095 0.507

Aigaleo 1.395 2.692 1.467 0.064 3.056 3.055 – 1.190 0.301 0.184 1.069

Akratitos 0.580 2.456 0.586 0 5.174 5.174 – 3.033 – 2.050 – 1.835 2.087

Mean 6.800 10.126 6.168 1.417 12.883 8.420 – 2.992 – 1.960 – 2.343 2.947


of the Greek Football League over the period 1993-2004. The table contains the mean values of

the accounting variables extracted from each club’s annual financial statements.


Furthermore, Table 5 presents the key financial ratios of the sample teamsfor the period 1993 to 2006. The overall picture is evident of the financial cri-sis that characterizes the Greek professional football league. Regarding liq-uidity, Greek football clubs have a mean level of current and quick ratio of43.3 per cent and 43 per cent respectively. This practically means that cur-rent assets cover only the 43 per cent of the current liabilities indicating a lim-ited ability to pay bills when they are due and to meet unexpected needs forcash. Additionally, the profitability ratios are quite distinctive of the overall sta-tus. The mean value of the net profit margin is – 43.3 suggesting that eacheuro of sales generates 43 euros of net loss. This is an indicator of the lowprofit making ability of the Greek teams resulting into increased losses as wesaw on Table 2. Also the ROA, ROE and asset turnover ratios are very lowsuggesting that football clubs do not use their assets productively in order togenerate sales and the shareholders investment seem to produce a negativereturn. Finally, the Equity/Assets and Debt/Equity ratios are key indicators ofpossible business failure and long term instability (0.813 and 5.27 respective-ly). Clubs’ liabilities are fifth fold compared to the shareholders equity whichcovers only the 81 per cent of their assets. This means that Greek footballteams are heavily leveraged since they have increased amounts of debt intheir capital structure which in turn affects negatively the teams’ long termsolvency.

Overall we can argue that the financial crisis that grows within the Greekprofessional football league is evidenced by the fact that professional footballclubs are highly leveraged, have intense liquidity and profitability problemsand face an increased danger of financial distress for more than fifteen years.The cause of this financial instability has been in part the increasing amountof funds that have flown into the league from the state, sponsors, TV and oth-er sources. This massive increase in financing generated an even greater in-crease in spending on players with no orientation on financial efficiency whatso ever. Consequently, when clubs entered the 1990’s having more or lessminimum losses these losses start to increase resulting into significant accu-mulations of debt that in some cases they cannot longer be financed.

Moreover, another reason for the financial imbalance of the Greek footballclubs is that the government stands ready to bail out failing clubs or thoseclubs which are in the edge of the bankruptcy, especially when those clubshave a solid fun loyalty base in national level meaning that a simple denial forhelp could result in a severe political cost for the government. A characteris-tic example is that of AEK FC in 2004 where the club was into deep financialdistress due to severe mismanagement (a typical case of CEO’s fraudulentbehavior) threatening its participation in the championship and in the UEFACup competition and also facing its relegation in the amateur division. Thestate decided to assist the club by re-arranging its debt and providing addi-tional financing since their refusal could damage the popularity profile of the


government. Therefore, someone could argue that there is no chance thatclubs such as Olympiakos and Panathinaikos would ever be allowed to gobankrupt whatever the financial problems of these clubs are. Consequently,although there may exist a financial crisis for lenders and the state, the clubsthemselves are “immune” to any threat since governments are willing to sup-port those failing football clubs. Such cases are common to other Europeancountries such as Spain, Belgium and Portugal.

Table 5. Key financial ratios of the Greek football clubs for the period1993-2006.

ClubsAsset

ROA ROENet profit Equity to Debt to Current Quick Cash flow

Turnover margin assets equity ratio ratio to sales

AEK 0.305 – 0.429 – 2.425 – 129.964 0.017 8.125 0.271 0.175 2.139

Aris 0.501 – 0.508 – 0.403 – 119.825 0.133 1.359 0.27 0.177 0.217

Iraklis 0.693 – 0.326 – 0.252 – 52.678 0.073 0.965 0.211 0.137 1.112

Ionikos 0.128 – 0.015 0.068 2.533 0.177 38.960 0.456 0.460 4.476

Olympiacos 0.349 – 0.270 – 0.298 – 47.360 0.116 0.027 0.291 0.323 0.475

Panathinaikos 0.294 – 0.186 – 0.527 – 31.423 0.513 1.586 0.378 0.305 0.911

Panahaiki 0.851 – 0.235 – 0.312 – 20.341 0.189 1.289 0.261 0.251 2.325

PAOK 0.526 – 0.341 – 0.880 – 45.784 0.271 4.375 0.290 0.222 0.742

Pas Giannena 2.290 – 0.993 – 0.328 – 34.210 0.458 3.125 0.020 0.020 – 7.838

Skoda Xanthi 0.606 – 0.040 – 0.018 – 2.192 0.651 4.240 0.420 0.364 0.958

Proodeutiki 0.831 – 0.214 – 0.142 – 12.606 0.327 -0.748 0.300 0.230 2.270

Kalamata 0.294 – 0.119 – 0.087 – 21.470 0.454 4.150 0.306 0.276 – 0.200

Panileiakos 0.231 – 0.074 – 0.121 – 10.102 8.975 2.181 1.461 2.466 3.751

Kallithea 1.104 0.308 0.975 19.455 0.710 1.260 0.665 0.842 0.563

Ethnikos 0.091 – 1.072 – 0.322 – 56.038 3.630 1.970 1.448 1.448 1.051

Aigaleo 0.127 0.076 0.125 6.0830 0.647 – 6.196 0.353 0.402 4.713

Akratitos 0.326 – 1.014 – 3.126 – 89.365 0.045 – 0.685 0.365 0.365 6.872

Mean 0.453 – 0.270 – 0.494 – 43.315 0.813 5.274 0.433 0.430 1.719


of the Greek Football League over the period 1993-2004. The table contains the mean values of

the financial ratios estimated from each club’s annual financial statements. Asset turnover is de-

fined as the ratio of net sales over total assets, ROA is the ratio of net income to total assets,

ROE is the ratio of net income to shareholders’ equity, Net profit margin is the ratio of net in-

come to net sales, Equity to assets is the ratio of shareholders equity to total assets, Debt to eq-

uity is the ratio of total liabilities to shareholders equity, Current ratio is the ratio of current as-

sets to current liabilities, Quick ratio is the ratio of cash + marketable securities + receivables to

current liabilities, Cash flow to sales is the ratio of operating cash flows to net sales.

Finally, another reason for the intense financial instability that characterizesthe Greek football clubs is the relative independence of club’s directors. Espe-


cially, directors of small clubs are willing to invest everything on success byborrowing large amounts from banking institutions while facing limited person-al risk (since football clubs are limited liabilities companies). This attitude is en-couraged by the fact that shareholder’s influence on such managerial decisionsis quite limited leaving directors making choices, comfortable that a broadspread of investments (mostly players and facilities) will produce a positive re-turn. However, the danger of insolvency risk questions the efficiency of this in-vestment strategy in the long term. Therefore, the present legislative frame-work and the governmental attitude regarding football management provedinadequate since it did not solve but on the contrary it boosted the initial fi-nancial problems of the football clubs. Thus a lot need to be done by bothmanagers and regulators so as to circumvent the existing financial crisis andenhance the ability of the clubs to be mutually profit and utility maximizers.

Discussion and Policy Implications

Recent evidence based on the auditing process conducted by the Ministryof Economic Development revealed a rather disappointing outcome regardingthe financial position of the Greek professional football clubs. Most of theteams participating in the first division of the league won’t be able to proceedwithin regular and seasonal player transfers since they do not fulfill the legalprerequisites of financial disclosure and performance. This fact came in linewith the growing evidence of the financial crisis that spreads throughout theprofessional football leagues in Europe. Under the aforementioned frameworkthe present study aims at explaining the particular causes of the recent fi-nancial crisis which characterizes the Greek professional football league.

The analysis of the clubs’ annual financial statements for a period of 14years (1993-2006) revealed that the Greek football clubs are highly leveraged,have intense liquidity and profitability problems and face an increased dangerof financial distress. Consequently, the above mentioned crisis can be attrib-uted to aggregate financial mismanagement (inadequate strategic planning,fraudulent behavior etc.) and political inefficiencies during the last fifteenyears. Someone could argue that there exists a significant risk which I believeis no longer imperceptible to both managers and regulators, that if the pre-sent situation continues within the following ten years football clubs will “com-pete” to the increased probability of bankruptcy. Hence specific actions needto be taken in order to adverse the existing status quo.

As we already know, investment in sporting activities has the same princi-ples and needs as those of any investment. This practically means that spe-cific decisions need to be made in order to determine the resources neededfor the investment and the level of effectiveness of the final objective. There-


fore, football clubs need to establish performance indicators on different lev-els of their operation such as resource indicators (commitment to the annualbudget), financial indicators (evaluate progress of business plans, cost mea-surement, etc), production and result indicators which provide information onthe conduct and performance of club’s finances, while finally club managerscould introduce impact indicators which are linked to any consequences be-yond the immediate impact of any investment scheme. As Alonso and Fer-nández (2009) argue, the establishment of performance indicators could as-sist sport organizations on using their resources efficiently which in turn willproduce an output with an expected value which will cover the initial cost ofthe resources thus leaving no room for financial imbalances. The aforemen-tioned elements of performance analysis could provide additional informationto club managers on highlighting problematic areas and taking corrective ac-tions when needed, thus enhancing the decision making process.

Another possible way for achieving enhanced managerial efficiency on foot-ball clubs is the establishment of the balanced scorecard originally proposedby Kaplan and Norton (1996). This method includes the adaptation of perfor-mance indicators within four inter-connected managerial perspectives (finan-cial, customer, internal management and learning & growth perspectives)which encapsulate the vision and strategy of the organization. This methodhas been effectively adapted in public administration as Kloot and Martin(2000), Kriemadis et al. (2009) and Cavalluzzo and Ittner (2004) have alreadyargued and can be easily modified in football clubs. Being more specific, interms of the financial perspective football managers must determine econom-ic and efficiency criteria on personnel productivity, savings in expenses andhow the resources are employed in order to achieve the organization’s aims.Regarding the customers perspective, clubs must create a high-quality sportservice image and achieve an increase in their customer base by improvingproducts and services.

The internal management perspective is deemed crucial since its main ob-jective is to identify the key processes through which any investment on thesport is translated into high-quality efficient services. One point which may beconsidered as key for internal management is better coordination of the sportactivities promoted by the clubs. Also indicators should be put in place to en-hance the evaluation of administrative, technical and economic improvementsmade to the club’s management such as quality and efficiency of processes,productivity etc. Finally, the learning and growth perspective should focus onthe continual improvement of employee training, not only in terms of techni-cal issues (as the athletic performance which dominates football clubs today),but also in terms of economic efficiency. One of the advantages of the bal-anced scorecard is that it includes the different areas of the company show-ing the casual effects among them and helps determining whether the variousprocesses (in line with the club’s vision and strategy at the time of the in-


vestment) achieve their objectives. Therefore, the adaptation of the balancedscorecard on football clubs could assist managers to base their decision mak-ing in line with the vision and strategy of the whole organization. As I havealready argued in previous section, athletic performance cannot move sepa-rately with economic performance. Consequently, the balanced scorecardcould provide directions on how these aforementioned dimensions (athleticand economic maximization) will not antagonize but complement each otheron dealing with financial instability and achieving the organizational objectives.

Moreover as it was discussed in the previous section, Greek football clubspresent disproportionate expenses relative to the level of sales they generate.This fact could be attributed to inefficient cost management which in turn di-minishes club’s profit making ability. Under this framework activity-based cost-ing could be proved extremely useful in managing the club’s expenses, assist-ing in a more accurate pricing of services and limiting any inconsistenciesbetween actual and budgeted operating costs. Despite the fact that activitybased costing was at first created in order to serve the cost management needsof industrial organizations, soon researchers considered the possibility of ap-plying this particular methodology in the service sector as well. Kaplan (1994)documents that since the early 1980’s many firms operating in the service sec-tor for instance logistic companies, banks and hospitals had already developedcost accounting models similar to ABC. Moreover, Sephton and Ward (1990) ar-gue that ABC can be applicable in the financial institutions because it can con-trol the common costs and offer information regarding the cost in high risk fi-nancial products. Additionally, King et. al (1994) examined the possibility ofimplementing ABC in English hospitals and concluded that the British NationalHealth System can benefit from the adoption of ABC because it is a methodthat can easily adapt in the specific needs and particularities of each institution.

As Dimitropoulos (2007) argues, in order to utilize the activity-based cost-ing methodology in sport organizations, football managers must first under-stand the types of costs that are involved, the activities that take part and theproducts that are produced. Following this path football clubs will accomplishto decrease the deficits and all the unnecessary costs, thus improving thequality of the product and gaining the confidence and satisfaction of their cus-tomers. Under this notion managers can differentiate the total cost in the costof practicing in a specific sport activity (athletic product), costs relative to theteam or the athletes and in the remaining types of costs such as promotion-al and marketing costs, administrative costs, maintenance, finance costs etc.The cost of the athletic product can easily be distributed in the activities thatare related to it, while the remaining cost can be spread according to thenumber of participants to a specific event or via special parameters like thetime of utilization of a sport facility in an indicative period. The sport sector iscomposed to a great extent of service functions, therefore efficient cost man-agement is a very important issue that sport managers must take under con-


sideration in order to achieve more resourceful product costing, cost reduc-tion, operational efficiency and profitability. Activity based costing could be apowerful managerial tool for dealing with all aforementioned issues and mostof all with the financial instability that characterizes the Greek football clubs.

Another issue that needs attention is the problem of financial mismanage-ment (lack of corporate control, managerial instability and even fraudulent be-havior). A strategy on this direction is to adopt the principles of modern cor-porate governance. Previous studies have documented the positive effects ofmodern corporate governance on the firms’ financial performance, communi-cation and managerial efficiency, accounting disclosure and social responsibil-ity (Agrawal and Knoeber, 1996; Aguilera et. al 2006; Brown and Caylor,2004). Issues such as board size and independence, ownership concentrationand the alignment of interests between stakeholders and the directors couldpotentially help professional football clubs to improve their managerial effi-ciency. Therefore, regulators must take into consideration the aforementionedbenefits of modern corporate governance and should make constructive effortsin promoting this issue as an additional aid to managerial efficiency.

Furthermore, as we previously mentioned the Greek professional league isbeing characterized by low competitiveness standards since it is dominated bythree major football clubs in terms of attendance, assets, cash flows, playerinvestments and athletic success. In order to enhance closeness of teams’athletic ability and the uncertainty of the league, regulators must provide ad-ditional financial assistance on the smaller and less profitable teams so as tobe more able to bid for competent players and have equal chances to com-pete for the championship. Since spectators generally prefer a close matchthan a one-sided match, league’s uncertainty could boost the profit makingability of all football clubs (see also Borland and Lye, 1992).

Additionally, one possible solution to the financial instability and credibility ofthe football clubs is to impose tighter financial regulations. One such measure isto establish an independent committee (relative the committee established inFrance during the early 1990s) to monitor the finances of the football clubs andto enforce their rules under their law-supported power. However, such enforce-ment can be effective only with strong legal backing so as to cope with pres-sures from political lobbies and the national football federation. Moreover, an al-ternative to strict regulation is the restructuring of football competition so as tocreate a more nourishable basis for smaller clubs in order to assist them main-tain both competitive balance and financial stability. This can be achievedthrough the adoption of salary caps, roster limits, revenue sharing and other re-distributive measures many of which have already been promoted in Europe.

Finally, specific actions need to be taken by policy regulators in order to pro-mote the idea of professionalism on the management of sport entities and orga-nizations. A specific act on that direction is to encourage league’s transparencyby imposing a full time employment contract on the members of the referee as-


sociations, thus reducing the allegations of referees’ malpractice and corruption.Also the investment in higher education courses in sport management could beproved vital for the future survival and growth of the game (Barros, 2006).

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Address for correspondence:Panagiotis DimitropoulosLysandrou 3-5,23100, SpartaGreecee mail: [email protected]


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