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Introducing hard budget constraints without restricting entrepreneurs: the role of voluntary agreements in UEFA’s Club licensing and financial fair play regulations


Franck, E (2021). Introducing hard budget constraints without restricting entrepreneurs: the role of voluntary agreements in UEFA’s Club licensing and financial fair play regulations. In: Andreff, Wladimir. Comparative Economic Studies in Europe: A Thirty Year Review. Cham: Springer International Publishing, 413-437.

Abstract

In the past European club football provided a textbook example of the “soft budget constraints phenomenon” initially described by Janos Kornai. As a remedy UEFA introduced the Club Licensing and Financial Fair Play Regulations (FFP). The Break-Even Requirement and the Fair Market Value Principle were the main elements of these regulations since their introduction in 2009 and first application in 2012. In 2015 the new concept of Voluntary Agreements was added. Which is the presumed rationale behind this major amendment of the rules? After analyzing the effects of The Break-Even Requirement and the Fair Market Value Principle, we propose that the new concept of Voluntary Agreements makes FFP less vulnerable to the allegation that it discriminates against true entrepreneurs wishing to develop mismanaged football clubs into sustainable businesses. Voluntary Agreements give such entrepreneurs more flexibility to invest, which would be of particular importance in environments where quality is only slowly remunerated by the football markets. The fact that not a single Voluntary Agreement has been signed until January 2020 is hard to reconcile with the allegation of discrimination.

Abstract

In the past European club football provided a textbook example of the “soft budget constraints phenomenon” initially described by Janos Kornai. As a remedy UEFA introduced the Club Licensing and Financial Fair Play Regulations (FFP). The Break-Even Requirement and the Fair Market Value Principle were the main elements of these regulations since their introduction in 2009 and first application in 2012. In 2015 the new concept of Voluntary Agreements was added. Which is the presumed rationale behind this major amendment of the rules? After analyzing the effects of The Break-Even Requirement and the Fair Market Value Principle, we propose that the new concept of Voluntary Agreements makes FFP less vulnerable to the allegation that it discriminates against true entrepreneurs wishing to develop mismanaged football clubs into sustainable businesses. Voluntary Agreements give such entrepreneurs more flexibility to invest, which would be of particular importance in environments where quality is only slowly remunerated by the football markets. The fact that not a single Voluntary Agreement has been signed until January 2020 is hard to reconcile with the allegation of discrimination.

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Additional indexing

Item Type:Book Section, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2021
Deposited On:27 Jan 2021 17:42
Last Modified:27 Jan 2021 17:42
Publisher:Springer International Publishing
Series Name:Studies in Economic Transition
ISBN:978-3-030-48294-7 (P) 978-3-030-48295-4 (E)
OA Status:Closed
Publisher DOI:https://doi.org/10.1007/978-3-030-48295-4
Related URLs:https://link.springer.com/book/10.1007%2F978-3-030-48295-4 (Publisher)
Other Identification Number:merlin-id:20592

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