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A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs


Franck, E; Lang, Markus (2014). A Theoretical Analysis of the Influence of Money Injections on Risk Taking in Football Clubs. Scottish Journal of Political Economy, 61(4):430-454.

Abstract

This paper analyzes the adverse incentive effects produced by money injections of benefactors [sugar daddies (SD)]. We show that the existence of a SD induces the club to choose a riskier investment strategy and the more the SD commits to bailout the club, the more the clubs’ optimal level of riskiness increases. Moreover, a private SD bails out the club less often than a public SD. Our model further shows that a ‘too‐big‐to‐fail’ phenomenon exists because it is optimal to always bailout a club if its market size is sufficiently large.

Abstract

This paper analyzes the adverse incentive effects produced by money injections of benefactors [sugar daddies (SD)]. We show that the existence of a SD induces the club to choose a riskier investment strategy and the more the SD commits to bailout the club, the more the clubs’ optimal level of riskiness increases. Moreover, a private SD bails out the club less often than a public SD. Our model further shows that a ‘too‐big‐to‐fail’ phenomenon exists because it is optimal to always bailout a club if its market size is sufficiently large.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Sociology and Political Science
Social Sciences & Humanities > Economics and Econometrics
Language:English
Date:23 July 2014
Deposited On:12 Sep 2019 12:04
Last Modified:31 Jul 2020 03:39
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0036-9292
OA Status:Closed
Publisher DOI:https://doi.org/10.1111/sjpe.12052
Other Identification Number:merlin-id:18202

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