Analysing The Performance Of The English Premier League

Analyzing the Performance of the English

F.A. Premier League With

an Econometric Frontier Model

CARLOS PESTANA BARROS

Technical University of Lisbon

STEPHANIE LEACH

Imperial College London

This article uses an econometric frontier model to evaluate the performance of football

clubs present in the English F.A. Premier League from 1998-1999 to 2002-2003, combining

sport and financial variables. A stochastic Cobb-Douglas production frontier model is

used to generate football club efficiency scores.We conclude that the price of labour, the

price of capital players the price of capital stadium, points gained, attendance, and turnover

all play a major role in football efficiency and find that the efficiency scores are

mixed.

Keywords: England; Premier League; Cobb-Douglas frontiermodel; technical efficiency

In this article, we present an application of an econometric frontier model to the

analysis of two different measures of success in the English professional football

industry: sporting success and financial success. Using data on English Premier

League (also known as the Premiership) clubs obtained from the Deloitte&Touche

Annual Report on Professional Football Finance (2004), the article expands on previous

research by comparing the efficiency scores of the clubs with a stochastic

frontier model. Previous research on the efficiency of the Premier League has relied

on data envelopment analysis (DEA; Barros & Leach, 2005; Haas, 2003b).

391

AUTHORS'NOTE: We thank two anonymous referees for the constructive and thoughtful comments

provided on an earlier draft of the article. Any remaining errors are those of the authors. Correspondence

concerning this article should be addressed to Carlos Pestana Barros, Instituto Superior de Economia e

GestÐ"Јo, Technical University of Lisbon, Rua Miguel Lupi, 20, 1249-078 Lisbon, Portugal: e-mail:

Cbarros@iseg.utl.pt.

JOURNAL OF SPORTS ECONOMICS, Vol. 7 No. 4, November 2006 391Ð'-407

DOI: 10.1177/1527002505276715

Ð'© 2006 Sage Publications

Ð'© 2006 SAGE Publications. All rights reserved. Not for commercial use or unauthorized distribution.

Downloaded from http://jse.sagepub.com at UNIV OF BIRMINGHAM on January 15, 2008

The motivation for the current research stems from several issues related to the

management of professional football in England: first, comprising 20 clubs, the

English Premier League is characterized above all by the power of finance and

commercialism.We can observe an uneven playing field in the Premier League, in

which the market leaders, in terms of turnover, appear to be virtually guaranteed of

sporting success, whereas a large number of the clubs are playing in subchampionships

of their own, with very different objectives from the few elite clubs. It is of

interest to consider what this means, in addition to howit has come about during the

past decade or so.

A second motivation, stemming from the previous point, is to consider the role

of the European football federation's (UEFA) tournament in influencing English

clubs' management strategies. The past decade has been marked at the European

level by a massive injection of prize money for teams qualifying to compete in the

revamped Champions League. A quota system is in place by which Europe's most

powerful leagues (England, Spain, Italy, and Germany) have the right to up to four

clubs in the lucrative tournament every season. The significance of this is that an

English club in 4th place in the Premier League can reap rewards as great as the

national champions, if not greater, depending on its progress in Europe. Thus, for

the English elite clubs, the Premier League and the European Champions League

are twin "golden geese."

Finally, exogenous shocks currently affect the Premier League, particularly evident

in the case of Chelsea FC, following the purchase of this club by the Russian

oil billionaire Roman Abramovich in June 2003. This has had the effect of breaking

the previous dual hegemony of Manchester United and Arsenal, in addition to

affecting the relative efficiency.

The article extends previous research on football efficiency, adopting a stochastic

frontier model, as Hoeffler and Payne (1997) and Dawson, Dobson, and Gerrard

(2000) did, to evaluate the technical efficiency of the English Premier League football

clubs, using a sample composed of those clubs that played in this league in all

of the seasons under analysis (1998-1999 to 2002-2003). This criterion ensures a

balanced panel data set, which is a prerequisite to obtain similar average scores