Why do football clubs go bust?

We have long regarded Stefan Szynmanski, now relocated to the University of Michigan, as the leading football economics guru.   What he can do with a multiple regression and outliers (under or over performing clubs) is a wonder to behold.

Now he has started a new blog which promises to deliver informed, in depth analysis of topics on the interface between economics and football.  The first topic he tackles is the familiar one of football club insolvencies.

We have long regarded Stefan Szynmanski, now relocated to the University of Michigan, as the leading football economics guru.   What he can do with a multiple regression and outliers (under or over performing clubs) is a wonder to behold.

Now he has started a new blog which promises to deliver informed, in depth analysis of topics on the interface between economics and football.  The first topic he tackles is the familiar one of football club insolvencies.

Broadly speaking, there are two possible reasons why clubs go bust: irrational exuberance and negative shocks.  On the face of it, irrational exuberance of the ‘sleeping giant’ kind seems the more likely explanation.  But in fact it seems that negative shocks are more important.

So what?  Well, it actually does matter for football governance.   Negative shocks are more difficult for regulators to deal with (essentially they are ‘exogenous’ or outside the regulators’ control).   This has implications for the viability of Uefa’s financial fair play scheme.

We welcome the competition provided by Stefan’s blog.   Competition is the basis of a market economy and of football.