the extent to which financial inflows affect the performance of Barclays Premier League
Introduction
International movements of financial capital have specifically become major after the advent of financial globalization (Agenor, McDermott and Ucer 1997). Large capital flows specifically to developing nations in the last decades have been a major global economic phenomenon. As the neoliberal policies encouraged greater liberalization of international financial system, countries also deregulated their financial system with the objective of attracting international financial capital. It would be presumed that this kind of integration with international capital market disengaged the association between investments and poor domestic savings by improving the efficiency and depth of financial system. Financial movements have been classified as either inflows or outflows. According to Agenor, McDermott and Ucer (1997), financial inflows refer to increase in the amount of money from foreign or external sources for the purchase of local capital assets such as land, machines, and land. In this regard, this research attempts to find the extent to which financial inflows affect the performance of Barclays Premier League.
The Barclays Premier League refers to an English professional league for association football clubs (Arsenal Foundation 2012). Twenty clubs compete in the Barclays Premier League, which operates on a system of relegation and promotion with the football league. The Barclays Premier League is a business having 20 member clubs that act as shareholders. The football season of Barclays Premier League runs from August to May every year.
Aims and Objectives
This research has the main objective of determine the extent to which financial inflows affect the Barclays Premier league.
Literature Review
According to Brand Finance plc (2012), the Barclays Premier League had revenue of about 2.479 billion Euros in the fiscal year 2009/10. The premier league is ranked second in terms of profits after the German Bundesliga. In addition, the league has also been acknowledged for its remarkable contribution to international trade and the value it adds to the UK’s broadcasting industry (Partner 2012).
According to Szymanski (2001) and Trudo (2008), the Barclays Premier League has experienced significant growth in television broadcasting revenues as a league, as well as on club levels. In fact, TV broadcasting is one of the major sources of revenue for the BPL. The 190 million Euro received by BPL for its first business deal for the period 1992 to 1997 is easily dwarfed by the present deal it has with Setanta and BskyB for the period between 2010 to 2013 that is claimed to be about 1,782 billion Euros (Trudo 2008).
Barclays Premier League bargains the broadcasting rights as a solitary entity, where matches are sold in packages of six to interested bidders (UEFA 2010). Presently, the broadcasting revenue is divided on a ratio of 50:25:25. Based on this ratio, 50 per cent of the revenue is distributed evenly amongst the 20 clubs, 25 per cent is awarded based on merit, and the rest is divided as a fee for facility based on the number of matches broadcasted. According to the studies of UEFA (2010) and Brand Finance plc (2012), the Premier League is broadcasted to over 600 million individuals and 200 nations worldwide. As a result, they concluded that financial inflows from these nations have a significant impact on BPL. However, they were not specific on how these inflows affect BPL. UEFA (2010) and Arsenal Foundation (2012) in their study concluded that television broadcasting forms a major source of finance to the BPL. They point out that fluctuations in the number of matches being broadcasted are likely to have an effect on the performance of Barclays Premier League.
The capacity of the stadium and commercial revenue seems to increase the capital inflow of BPL. According to Arsenal Foundation (2012), BPL clubs that are efficient in generating the best matchday revenue because of higher capacity of the stadium, as well as in capitalizing on profitable sponsorship deals, are able to generate additional cash inflow. This places such clubs in better position than others that cannot secure lucrative deals. Partner’s (2012) study revealed that Bayern Munich, though not a club of BPL, generated significant financial revenue worth 177.7 million Euros (UEFA 2010). This facilitated Bayern Munich to compensate its losses.
In conclusion, this section has reviewed the past and existing literature on the effect of financial inflows on the performance of Barclays Premier League.
Research Methods
The research methods chapter is one of the significant sections because it outlines the required information in evaluating the reliability and validity of the research (Dawson 2002). Consequently, offering a precise description of the study methods and the individual rationale are likewise vital in asserting the validity of this report. The research methods used are determined by the context of the study and nature of research questions. In addition, it is vital to consider the perception that the study depends significantly on probability (McBurney and White 2009). As a result, the research methods used in this study seeks to explain the role accomplished by a curtained predetermined measurement variable in influencing the outcome. It is also likewise imperative for this research to emphasize on the results, together with the comparison of the available conceptual frameworks in order to show the extent to which financial inflows affect the performance of Barclays Premier League.
Research Design
McBurney and White (2009) defined research design as a plan, which outlines the steps required in answering the research questions. According to Dawson (2002), research design has the precise objectives drawn from the research questions and highlights the sources needed for the collection of data. Research design involves structuring the study in order to determine the variables and relationships between them. In other words, research design represents a sketch, which serves as a useful guide for the researcher when collecting data. This study uses the case study design
Case study method facilitates the researcher to analyze closely the data in specific situation or contexts (McBurney and White 2009). In many cases, case study design selects a limited number of individuals or contexts to serve as the subjects of the study. This study will examine two case studies involving the financial inflows in the Barclays Premier League. From these case studies, the study will be able to conclude whether financial inflows affect the performance of BPL.
Case study 1: Abramovich and Chelsea
The arrival of Roman Abramovich at Chelsea is a clear portrayal of financial inflows. According to UEFA (2010), the owners of a club play a crucial role in offering necessary financial assistance to the clubs. As such, the amount of financial assistance offered by club owners might in turn widen the gap between the clubs in the Barclays Premier League. Abramovich has been reported to have injected over a billion Euros into the club. This has enabled Chelsea Football Club to bring talented footballers such as Fernando Torres and David Luiz. Fernando cost the club about 50 million Euros, whereas David Luiz cost the club about 23 million Euros.
Case Study2: Sheikh Mansouh and Manchester City
The budget of Manchester City has also been boosted since the Sheikh Mansour took over the club. The group from United Arab Emirates quickly announced their intentions witht he massive purchase of Robinho from Real Madrid. They continued their massive spending by signing Emannuel Adebayor, David Silva, Mario Ballotelli among other excellent football. Initially the club could not afford to purchase these players. The new ownership of the club enabled Robert Mancini to purchase excellent talents such as Edin Dzeko and Sergio Aguero. Edin Dzeko cost the club about 27 million Euros, whereas Sergio Aguero cost about 35 million Euros. Predictably, Manchester City quickly transformed from a mid-table team to a formidable squad that mounted a serious challenge against Manchester United during the last season.
Research limitations
Case study design receives a lot of criticism relating to its lack of forcefulness as a study tool, creating the design of case studies will be of great importance to this research.
Findings and Interpretations
From the first case studies, it is evident that financial impacts have a significant impact on the performance of Barclays Premier League. Roman Abramovich increased the club’s financial inflows. This enables Chelsea to sign professional players that managed to take the club to another level of football. The performance of Chelsea improved significantly from the arrival of these two players, though Torres has been viewed to be insignificant in some cases. In this regard, some analysts have stated that the performance of the clubs in the Barclays Premier League significantly relies on the abilities of the players and the managers. Most of these analysts have refuted the fact the financial status of a club determines its performance.
From the second case study, the UAE group increased Manchester City’s financial inflow. The members of the rich royal family enabled the club to sign new players. Predictably, Manchester City quickly transformed from a mid-table team to a formidable squad that mounted a serious challenge against Manchester United during the last season. In fact, Manchester City won title narrowly against Manchester United. This was perhaps because of the newly signed players. The purchases of Samir Nasri and Gael Clichy have propelled the team to the second position in the Barclays Premier League.
Conclusions
The study has answered the research question. It is evident that financial inflows determine the manner in which clubs perform in the Barclays Premier League. Clubs that have huge financial inflows seem to perform better than those with smaller financial inflow do. This study uses the case study design. Case study method facilitates the researcher to analyze closely the data in specific situation or contexts. Future research should use primary sources of data to avoid the loopholes presented by the secondary sources.
References List
Agenor, P, McDermott, C and Ucer, M 1997, ‘Fiscal imbalances, capital inflows, and the real exchange rate: the case of Turkey’, European Economic Review, vol 41, pp. 819-825.
Arsenal Foundation 2012, The Arsenal Fund, viewed 15 May 2013, < HYPERLINK “http://www.arsenal.com/assets/_files/documents/may_12/gun__1337782104_gun__1337779959_Grant_Making_G.doc” http://www.arsenal.com/assets/_files/documents/may_12/gun__1337782104_gun__1337779959_Grant_Making_G.doc >.
Brand Finance plc 2012, ‘The top 20 most valuable footbal brands’, Brand Finance plc, London.
Dawson, C 2002, Practical Research Methods: A User-friendly Guide to Mastering Research Techniques and Projects, How To Books Ltd, New York.
McBurney, D and White, T 2009, Research methods, Cengage Learning, New York.
Partner, D 2012, Deloitte football money league 2012, viewed 15` May 2013, < HYPERLINK “http://www.deloitte.com/view/en_GB/uk/industries/sportsbusinessgroup/sports/football/deloitte-football-money-league/691295aa0c415310VgnVCM1000001a56f00aRCRD.htm” http://www.deloitte.com/view/en_GB/uk/industries/sportsbusinessgroup/sports/football/deloitte-football-money-league/691295aa0c415310VgnVCM1000001a56f00aRCRD.htm >.
Szymanski, S 2001, ‘Income inequality, competitive balance and the attractiveness of team sports: some evidence and a natural experiment from English soccer’, The Economic Journal, vol 111, p. 69–84.
Trudo, D 2008, ‘Football in Belgium from centre to semi-periphery: analyzing the financial ground ‘, North American Association of Sports Economists, vol 4, no. 3, pp. 08-27.
UEFA 2010, ‘UEFA club licensing and financial fair play regulations’, UEFA, Lyons.
Vopel, H 2011, ‘Do we really need financial fair play in European club football?An economic analysis’, Hamburg School of Business Administration, Hamburg Institute of International Economics, CESifo DICE, Hamburg.
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