Competitive Balance and Concentration Ratios in Economic Terms in Liga BBVA
The Financial Situation of Spanish Football / Competitive Balance and Concentration Ratios in Economic Terms in Liga BBVA
B19 Lecture Room
Main Building, Birkbeck College
London WC1E 7HX
(For directions please see the pdf map).
Wednesday 18th May 2011 at 6pm
Given by: Dr Ángel Barajas, University of Vigo, Observatorio Económico del Deporte.
In this presentation the current financial situation of Spanish professional football is outlined, with a particular focus on the relationships between the size of market, team payrolls and team performance. It is demonstrated that the financial problems are created by the financial “arms race” that Spanish clubs are engaged in to hire the most talented players in order to achieve the best possible sporting outcome. Under the criteria for the new Spanish law for companies in financial distress it is implied that nine clubs in La Liga are technically insolvent and under administration. The presentation provides a detailed exposition or the reasons for this situation.
Allied to the phenomenon of chronic financial stability the La Liga competition has become extremely unbalanced. The presentation therefore then proceeds to analyse the nature of competitive balance in La Liga in recent years.
Neale (1964) pointed that the economy of professional sports is ‘peculiar’. Traditional economic analysis stands that a market without competitors will be the best case scenario for a firm. Nevertheless, in professional sports, competitors are necessary to offer the product (league, tournaments, etc.). Uncertainty in the output of a competition is part of its appeal. Leagues will be better off if they present a higher competitive balance.
Competitive balance is not an easy concept but appears since the very beginning of the sport economics in the seminal article by Rotenberg (1956). Moreover, there are different definitions and ways to measure it. García and Rodríguez (2007; 173) suggest that ‘competitive balance exists when at the beginning of the league all teams have real chances of classifying for the UCL and/or being relegated to the Second Division’.
This paper takes as a reference the work by Espitia and Gracia (2009). They present the competitive balance levels in the five major football leagues in Europe – England, France, Germany, Italy and Spain. They use some common tools in industrial economy in order to assess the balance in those leagues. Some of these tools are applied in this presentation by checking competitive balance and competitive level from the economic point of view.
This presetnation searches for differences in competitive balance and concentration ratios in economic terms in the La Liga BBVA. The proposition is to compare if club income inequality is related to and increases competitive imbalance.
- Barajas, A. (2011). Competitive Balance and Concentration Ratios in Economic Terms in Liga BBVA. University of Vigo working paper.
Ángel Barajas is an associate professor of financial management in the Department of Accountancy and Finance at the University of Vigo, Spain, and a researcher for the Spanish Economic Observatory for Sport (Observatorio Económico del Deporte). His research interests include investment valuation and finance of sports, particularly professional football.
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Department of Management
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