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Do finances explain performance?

Relationship between financial performance and sports

performance in Premier League and Allsvenskan

Petrus Lempinen, Vincent Rylander

Department of Business Administration International Business Program

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Abstract

The topic of finance in football have drawn a great deal of attention, not least in the last twenty-five years. While many see football simply as a game, set up to amuse spectators or as a way for athletes to compete for becoming the number one, football has more to it than meets the eye. By introducing alternative rulings for labour, the football industry set of to become increasingly competitive and created opportunities for substantial financial advancements. Today, football has become an industry worth studying in its own right, not least in the sense of financial elements that has become central topics when assessing and evaluating performance.

This study has been inspired by the growing competitive landscape we today observe when dealing with European football. Correspondingly, this study will examine how the financial part of football teams correlate with the sportive part. The study follows previous research such as Szymanski (1998) and and Ferri et al. (2017) in the sense of taking a closer look at what impact the financial performance has on sport performance. Although, previous research contains vital information regarding the connection between the two, this study will further contribute to the subject. This study somewhat differentiate itself from others by taking on an approach as comparative in the context of different leagues. By looking at the Swedish Allsvenskan and the English Premier League, this study seeks to see what differ between the two. The study was made by collecting financial data together with assessing the final league table position in order to investigate if correlation could be found and to what extent the two leagues differ in the context of financial impact on sports performance.

The findings of this study were mixed in the sense of expectations where significant relationships could be found for numerous variables but not entirely in line with previous research (Ferri et al., 2017). The two leagues also possessed different characters in the context of results, which the authors believe can be due to factors such as the size of clubs and investment opportunities.

By presenting an alternative approach to the research field, the authors believe that this study can be of interest to those willing to look closer into the different characteristics of finances and its relationship with sports in European football.

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Acknowledgements

We would like to thank our supervisor Irina Alexeyeva for guiding us and providing support throughout writing this thesis.

19.05.2020

Petrus Lempinen & Vincent Rylander

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Table of contents

1. Introduction ... 1

1.1. Choice of subject ... 1

1.2. Problem background ... 1

1.3. Research question ... 3

1.4. Research purpose ... 3

1.5. Structure of the paper ... 3

2. Theoretical framework ... 4

2.1. Sports performance ... 4

2.2. Financial performance ... 5

2.3. Motivations of football clubs ... 6

2.4. Leagues ... 8

2.5. Hypotheses ... 9

3. Methodology ... 12

3.1. Research philosophy ... 12

3.1.1. Ontology ... 12

3.1.2. Epistemology ... 13

3.1.3. Methodological choice and research strategy ... 14

3.2. Research approach ... 15

3.3. Research design ... 15

3.4. Literature search and source criticism ... 16

3.5. Ethical considerations ... 17

4. Research method ... 19

4.1. Sample ... 19

4.2. Variables ... 20

4.2.1. Dependent variables ... 20

4.2.2. Independent variables ... 20

4.3. Regression analysis ... 21

4.3.1. Least-squares regression ... 21

4.3.2. Inference ... 22

4.3.3. Panel data regression ... 22

4.3.4. Regression models ... 23

4.4. Assumption ... 24

4.4.1. Linearity ... 24

4.4.2. Omitted variable bias... 24

4.4.3. Probability distribution ... 25

4.4.4. Multicollinearity ... 25

4.4.5. Heteroscedasticity ... 25

4.4.6. Autocorrelation ... 26

4.5. Type-1 and type-2 errors ... 26

5. Descriptive statistics ... 27

5.1. Summary statistics ... 27

5.2. Correlation ... 28

5.3. Grubbs’ test for outliers ... 30

5.4. Linearity ... 31

5.5. Multicollinearity ... 31

5.6. Error term ... 32

5.7. Heteroscedasticity ... 33

5.8. Autocorrelation ... 33

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5.9. Regression model specifications ... 34

6. Empirical results ... 36

6.1. Final regression model ... 36

6.2. Premier League ... 36

6.3. Allsvenskan ... 37

6.4. Quality criteria ... 39

6.4.1. Reliability ... 39

6.4.2. Validity ... 39

6.4.3. Generalization and replicability ... 40

7. Analysis and discussion... 41

7.1. Sports performance and Premier League ... 41

7.2. Sports performance and Allsvenskan ... 42

7.3. Comparison of Premier League and Allsvenskan ... 43

7.4. Theoretical discussion ... 44

8. Conclusions and implications ... 46

8.1. Conclusions ... 46

8.2. Societal implications ... 47

8.3. Limitations ... 47

8.4. Future research ... 47

9. Reference list ... 49

Appendix ... I Appendix 1. Pairwise correlations in Premier League ... I Appendix 2. Pairwise correlations in Allsvenskan ... II Appendix 3. Grubbs’ test for outliers in Premier League ... III Appendix 4. Grubbs’ test for outliers in Allsvenskan ... III Appendix 5. Correlation between residuals and independent variables ... IV Appendix 6. Scatter plot residuals vs predicted in Premier League ... IV Appendix 7. Scatter plot residuals vs predicted with logarithms in Premier League ... IV Appendix 8. Scatter plot residuals vs predicted in Allsvenskan ... V Appendix 9. Scatter plot residuals vs predicted with logarithms in Allsvenskan ... V List of figures Figure 1. The actual dynamics of football clubs’ performance ... 7

Figure 2. Positivist and interpretivist approaches ... 14

Figure 3. Deductive approach ... 15

List of tables Table 1. Variables used in the regression model ... 23

Table 2. Summary statistics for the Premier League ... 27

Table 3. Summary statistics for the Allsvenskan ... 28

Table 4. Correlation coefficients in Premier League ... 29

Table 5. Correlation coefficients in Allsvenskan ... 29

Table 6. VIF-test for Premier League ... 32

Table 7. VIF-test for Allsvenskan ... 32

Table 8. Breusch-Pagan test ... 33

Table 9. Durbin-Watson test for autocorrelation ... 33

Table 10. Breusch-Godfrey test for significant autocorrelation ... 34

Table 11. Breusch-Pagan LM test ... 34

Table 12. Final regression in Premier League ... 36

Table 13. Final regression in Allsvenskan ... 38

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1. Introduction

This chapter introduces the chosen subject, the background of the subject and presents the research question and purpose. Furthermore, this chapter will present the structure of the research.

1.1. Choice of subject

Football is a game that requires two teams with 11 players each. The two teams play against each other for 90 minutes, trying to get a ball in the other team’s goal as many times as possible. The team that has succeeded in placing the ball in the net of the other team for a larger number of times is the winner of the match. However, football is also much more than that. Football gathers people from all around the world to play, watch and participate in other ways. While the act of kicking a ball into a net against other people has emerged in many cultures throughout centuries or even millenniums (Giulianotti & Robertson, 2009, p. 5-6), most have agreed on that modern football emerged in the islands of Britain as early as the 14th century (Giulianotti & Robertson, 2009, p. 6). The game of football continued as a “people’s” game, until centuries later the elite and private schools in the British Islands adopted the sport. In 1848, the rules of Cambridge were agreed, and in 1863 the Football Association (FA) was founded in London (Giulianotti & Robertson, 2009, p. 6), securing the authority over football to the elite.

From there on, the game of football has grown and developed into an industry where the biggest clubs’ incomes can be measured in hundreds of millions (FC Barcelona, 2019, p.

215) and even the average annual salaries of Premier League football players revolve around £3 millions (McMahon, 2019). For the financial growth of modern football, the year 1995 was significant. In 1995, the so-called “Bosman-ruling” allowed football players in Europe to move freely between clubs in out-of-contract situations (Simmons, 1997, p. 13), increasing the wages and signing fees for top players (Giulianotti &

Robertson, 2009, p. 22). After the turning point of 1995, many European football clubs have been directing over 80 per cent of annual revenues into players’ wages (Giulianotti

& Robertson, 2009, p. 22).

The investment of revenue into players’ wages can be seen as an investment into a better technology in order to develop more efficient and successful processes. That investment would then be expected correspond to increased sports performance (in football’s case - winning). Since football clubs are willing to invest huge amounts of capital into wages and signing fees, it can be assumed that the investments then result into better results in terms of sports performance. However, this research will focus on one step further. This research will investigate the relationship between sports performance and financial performance in two different leagues, giving insight into the trends and differences that football leagues have.

1.2. Problem background

The introduction of the so-called “Bosman-ruling” turned football clubs into businesses, forcing clubs to find new sources of revenue (Galariotis et al., 2017, p. 590). While the ruling opened the borders of European football, the increased wages of players required the clubs to generate revenue from merchandise, sponsorships and TV-distribution

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(Galariotis et al., 2017, p. 590). Previous studies have investigated that phenomenon of financing football within a certain league, however research investigating European cross-league comparisons seems to be scarce, or at least insufficient. Multiple studies have investigated the financial performance of football clubs in Spain, England, France and Italy (Galariotis et al., 2017; Barajas et al., 2005; Ferri et al., 2017), finding models and trends in terms of sports performance, revenue and governance of football clubs, however only within those leagues. This study will try to find relations in the European level, studying the relationship between sports performance and financial performance in the Swedish Allsvenskan and English Premier League. Even though the leagues are played within the respected countries, the player market (Garcia-del-Barrio and Szymanski, 2009, p. 56) and UEFA-games expand on to a European level. Furthermore, Garcia-del-Barrio and Szymanski argue that competitive forces between leagues are similar, and that in fact financial comparisons can be made across leagues. In addition, financial research considering professional football in Sweden is insufficient.

As Garcia-del-Barrio and Szymanski argued, the competitive forces between football leagues are similar (2009, p. 56). In this study, the authors are going to investigate the possible differences between the English Premier League and the Swedish Allsvenskan.

Firstly, even though the United Kingdom and Sweden differ in terms of market size and investor rights (Leuz et al., 2003, p. 507), both the Premier League and Allsvenskan operate under and answer to the same governing body - Union of European Football Association (UEFA). Both Premier League and Allsvenskan are also the highest ranked football leagues of their countries. Premier League and Allsvenskan also share the highest average attendances of their countries’ football leagues and both in the Premier League and in the Allsvenskan, the clubs compete for the chance of playing in the UEFA Europa League and UEFA Champions League. Secondly, however, the Allsvenskan and Premier League are ranked differently. According to UEFA’s country coefficient (2020), England is placed as second after Spain, while Sweden is 21st on the list as of March 13th, 2020.

The country coefficient measures the quality of football within each association country, and the ranking determines the amount of clubs allowed to compete in the two aforementioned UEFA’s competitions (UEFA, 2020), implicating that the English football on average is of better quality than the Swedish football. However, as mentioned before, when the competitive forces between leagues remain similar, cross-league comparisons can be made, and valuable information of the differences between two leagues may be found. In this case, the Premier League and Allsvenskan are both “open leagues” (meaning that a club can get promoted or relegated from or to a lower league), they both are elite leagues within their own countries and both are (football-wise) governed by UEFA, allowing the cross-league comparisons between the Swedish and the English leagues.

Furthermore, another interesting aspect within sports and finances is the motivations of sports clubs. It is argued, that for any (contemporary) company, monopoly is the most benefiting form of doing their business (Neale, 1964, p. 1). The smaller the competition, the more power the company would have. However, in sports, in order for the teams (companies) to even perform they need another team to play against. Hence, Neale (1964, p. 4) argued that the football clubs themselves are not in the position to be a monopoly - they play against each others, serving the customers a single product (the game) - and instead the leagues would be in the position of monopoly. In England, the league is controlled by one authority (FA), which makes the English football league a natural monopoly. Since the governance of football leagues is rather similar in Europe, using data from different leagues instead of focusing on just one, makes it worthwhile investigating

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and can give valuable comparisons.

Lastly, since the research will be divided into comparison between two different ranked leagues, it is important to also consider how the effect of the size of the market can affect the performance of the clubs. Walker (1986, p. 210) argues that attendances in sports is affected by factors of two sorts. Firstly, the overall attendance (in a given league) is affected by the level of income, relative prices, and of other sporting substitutes, while attendance for a single team might be affected by the population of the area, quality of the team size, location of the stadiums and quality of competition (Walker, 1986, p. 210).

Since the size of the market generates revenue from attendance (Buraimo and Simmons, 2009, p. 3) and that revenue could then be invested into players, which again makes the comparison of leagues interesting from the aspect of sports performance and financial performance.

1.3. Research question

The research question is: “Is there a difference in the effect of financial performance on sports performance, between the Premier League and Allsvenskan?”

1.4. Research purpose

The main purpose of this study is to investigate the relationship of sports performance and financial performance. Secondly, the authors aim to investigate whether there is a difference in this relationship between Premier League and Allsvenskan. That research will bring valuable insight in the European football, not taking into consideration the political and organizational aspects of football clubs that may differ between leagues and countries (Michie and Oughton, 2005, 517; Barajas & Rodríguez, 2010, 52), but instead investigating the overall effect that success in finances has on the football field, and whether the relationship between finances and football performance benefits teams more in prestigious leagues (such as the Premier League) than teams in smaller leagues.

1.5. Structure of the paper

The paper will start by introducing the research topic, problem background, the research question and purpose. It will then present the theoretical aspects and literature surrounding the research question, providing a theoretical background to support this study. After that, the authors will present and motivate the selected methodological and philosophical approaches. The authors will then present the research methodology and descriptive statistics. Lastly, presentation and analyses regarding the empirical findings will be done based on the data collection and thereby conclude this research.

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2. Theoretical framework

In this chapter, the authors will critically analyse theories and literature related to the research question. The sources in this thesis is built on both primary and secondary sources. Primary sources include annual reports from the sports clubs that is going to be analysed together with data used to determine sports performance of the clubs. Given the research topic, the authors have analysed previous works related to the components and attempted to draw conclusions of their importance and applicability.

By emphasizing the importance of credible sources the authors assured that the conducted research was properly done in order to enhance the reliability and understand the field of sports performance in relation to financial performance. With the help of scientific articles, previous research could be examined and learnt from to realize concept, models and variables related to this study. These articles has mainly been gathered from Umeå Library databases (https://www.umu.se/en/library/) where peer-reviewed studies were of essence. Additionally, Google Scholar (www.scholar.google.com) has been used to further investigate and collect articles. The sources these articles refer to has been read through and investigated as to what extent they have been mentioned in other articles or literature. This enables the authors to ensure its quality and reliability together with minimizing the risk for misinterpretation or taking part of bias information.

In the following chapter the authors will divide the components in to sports performance, financial performance, concept of “big” and “small” leagues as well as reviewing the appropriate timespan. The authors will first present how these components are explained and used in prior research. After that, the authors will discuss possible effects of financial performance on sport performance in relation to the present study.

2.1. Sports performance

In the context of performance when discussing sports, previous literature has somewhat varied as different variables and factors has been considered when assessing the quality of a club. As the sports performance depends upon what one wants to investigate it is natural that studies do not follow the same framework when measuring performance.

Previous literature shows that different information has been used for above mentioned assessment. Palacios-Huerta (2004, p. 244-251) presents alternatives in home- and away wins together with average amount of goals scored per game. These were made on time intervals that reach back to 1888 and by calculating means together with standard deviations in the context of these results, Palacios-Huerta identified trends historically.

Konig et al. (2003, p. 269-271) also use average amount of goals scored as a tool.

Although, the Konig et al. present a rather complex model where the opponent and their quality are also accounted for when analysing the results. Additionally, Konig et al. use specific stages in tournaments to evaluate and estimate the chances of winning for national teams, disregarding to analyse the financial impacts of advancement.

The process of estimating performance seems attractive in various ways, above Konig et al. used it for estimating results in group- and knock out tournaments, while Espitia‐ Escuer and García‐Cebrián (2006) focus on the Spanish league when calculating the potential for each team. Firstly, they take into account the quality of the players which they use to calculate the potential of the team as a whole. Espitia‐Escuer and García‐

Cebrián further use the potential points to conclude their results and briefly mention that

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the sports performance could be dependent upon the amount and usage of resources, implying an importance for managerial efficiency and capacity. Resources also play a key role when calculating performance according to Garcia-del-Barrio and Szymanski (2009) where they constructed models for calculating performance, though in this case they focus on league position. This can, somewhat, be related to the analysis by Szymanski (1998) where he stated that wages affect the performance of clubs in the context football leagues. The performance in this case refers to which position a club ends up in at the end of a season. Szymanski also discuss a second principle which states that the performance also has an effect on revenue where there is a positive correlation.

Although, the same effect is not evident regarding profits and performance for his study.

Since one of the main concepts of this research is sports performance, the authors will follow Szymanski’s (1998) approach. In this research, sports performance will be considered as the finishing position in a league table, at the end of a season. This will provide a simple approach of how a football club has performed over the season, in relation to the other clubs. The league table consists of all of the teams playing in a given season, where a team that wins a game receives three points, if the teams play a tie, they will both get one point, and a losing team will receive no points. At the end of the season, the team with the most points wins the league.

2.2. Financial performance

Financial performance can be measured in a variety of ways. In finance literature, Waddock & Graves (1997, p. 309) have used variables such as return on assets, return on equity and return on sales as measurements of financial performance. Those variables are used in order to assess a company’s financial performance from the investment community’s aspect. Shin et al. (2016, p. 1126) have used return on investment (ROI) as a measurement of a company’s financial performance. The return on investment is an effective measurement taking into account the profit of a company in relation to the capital used in order to produce that profit (Shin et al. 2016, p. 1126). Moreover, other studies have used various measurements of financial performance. Metrics such as earnings on shareholder funds, return on total assets and labour productivity ratio have been used in order to analyse companies from the perspective of strategic quality management (Chapman et al., 1997, 438-439), while in other industries, such as the aviation industry, operating profit per output and profit per passenger have been used as key performance indicators (Demydyuk, 2011, p. 43).

In sports literature, analysis of financial performance has focused more on revenue and income. The measurement of budget has been used in order to assess the financial performance of a team (Barajas et al., 2005, p. 11). Barajas et al. defined budget as the expected total income, accounting revenue sources such as “sporting revenues” and

“season tickets”, counting in ticket sales, TV-rights and advertising and sponsorships all into the expected budget. Szymanski (1998, p. 48) used revenue as the key metric in his study about sports performance and financial performance. His main arguments were that higher league performance leads to higher revenue, but higher league performance is achieved by increased wages (Szymanski, 1998, p. 49). Szymanski concludes that in order to turn revenue into profits, the clubs need to take advantage of their brand and marketing.

In his analysis, Szymanski divided revenue into revenues from football activities, commercial activities and catering of Manchester United. The expenditures were further divided into wages, transfer spending and operational expenditures.

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Revenue has also been used in other articles as measurement of financial performance.

Lago et al. (2006, p. 5) used income as their key financial metric in order to analyse the overall economic situation of European football. Their use of “income” as the measurement showed that income (or the lack of it) is not the main issue in football’s finances, but the amount of costs play a part as well (Lago et al., 2006, p. 6). Lago et al.

emphasizes on the change in the income and costs. If income rises, costs are expected to rise as well. Following the studies of Galariotis et al. (2017), Barajas et al. (2005) and Ferri et al. (2017), the main source of financial data for this study is acquired from annual reports and financial statements of football teams. That financial information will then be used to analyse the effect of sports performance on the financial performance of the clubs.

As mentioned before, previous sports literature has used revenue as the main metric to analyse financial performance (Szymanski, 1998; Lago et al., 2006; Barajas et al., 2005) making revenue the selected financial metrics for this research.

Furthermore, a study conducted by Terrien et al. (2017) investigated the balance between wins and profits. To further understand the motivations of sports clubs which may not always be maximizing profits but maximize utility (Sloane 1971, cited in Terrien et al., 2017, p. 122; Galariotis et al., 2017, p. 591) it is interesting to investigate the financial performance from the aspect of maximizing profit and utility. Terrien et al. (2017, p. 124) used the relative operating profit of football clubs as their key metric due to its ability to give more accurate results of financial performance than using only revenue. The relative operating profit also takes into account the costs that football clubs faces, including the high wages and transfer fees that the clubs pay for their players. The relative operating profit is the operating profit divided by operating revenue.

Moreover, profit and revenue are easily accessible values from annual reports of football clubs, while their relation is still giving a deeper understanding of the financial performance than only using revenue. In order to investigate and answer the research question, only using revenues as a measurement is not enough, and taking the costs into account and analysing the relative operating profit will help to give more accurate results.

In addition, Ferri et al., (2017) used financial variables such as return on investment, assets, wages and leverage in order to investigate the relationship between sports performance and financial performance, giving a wider model for estimations. In their study, Ferri et al. investigated the relationship of finances and football in the Italian Serie A, predicting how each of the mentioned variables affect sports performance.

In conclusion, since this research will be studying the relationship between football clubs’

financial factors and sports performance, the financial variables that will be used in this research will be revenue, relative operating profit, return on investment, assets, wages and D/E-ratio, in order to give a deeper understanding of the different relationship within the teams’ performance. The choice of variables follows the example of previous research, such as Szymanski (1998), Ferri et al. (2017) and Terrien et al. (2017). This will give the authors a wider perspective in analysing the different factors, than using only revenue and/or relative operating profit, which then allows comparisons between different football leagues on a wider scale.

2.3. Motivations of football clubs

As this research analyses the links between sports performance and financial performance, the motivations of football clubs need to be considered as well. When considering both financial and sporting factors related to a club’s performance, Sloane

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(1971, cited in Terrien et al., 2017, p. 122; Galariotis et al., 2017, p. 591; Barajas et al., 2005, p. 1) argued that clubs - at least in the English leagues - are not focusing on maximizing profits, but instead focusing on maximizing utility. In other words, while financial performance have become a more important factor in the clubs’ performances (Barajas et al., 2005, p. 1), the clubs’ actions are motivated by wins and success, rather than the financial performance. However, even though clubs’ focus might be on wins, it is argued that both financial performance affects sports performance and vice-versa (Galariotis et al., 2017, p. 591). Galariotis et al. conclude that in fact clubs (in the French Ligue 1) with high revenues spend those revenues in order to perform in sports, which then allows the clubs to increase their revenue further. That revenue is then invested again in sports performance and so on, as visualized in Table 1 (Galariotis et al., 2017, p. 608):

Figure 1: “The actual dynamics of football clubs’ performance” (Galariotis et al., 2017, p. 608)

Because of that cycle, the clubs are unable to transform their increased revenues into financial results. According to the findings of Galariotis et al., clubs with the best sports performance and highest revenues in fact have the worst financial performance, implying that football clubs in France are willing to sacrifice their financial well-being over sports performance (Galariotis et al., 2017, p. 608). This research will have an approach which investigates that argument. Following the research question, the authors will investigate whether the financial performance affects the sports performance, and will use the distinction of win maximization and profit maximization as the base for the analysis.

Contradictory to the clubs’ motivations, the administrative body of European football - UEFA - introduced restrictions and rules in 2010 called the “Financial Fair Play” (Uefa, 2019). The Financial Fair Play -rules were introduced to for example “improve the economic and financial stability of the clubs…” and to “encourage clubs to operate on the basis of their own revenues” (Uefa, 2019). The most relevant articles of the Financial Fair Play regulations consider the break-even results of the football clubs. According to the articles 58-64 from the Financial Fair Play regulation, the football clubs’ expenses need to meet the clubs’ income, with the maximum deviation of €30 millions, depending on the other contributors of the clubs’ finances (Uefa, 2018), meaning that clubs cannot face large losses for a long period of time. Although football clubs are oriented towards winning, the UEFA regulations try to limit the possible losses and instead turn the clubs to be financially healthy.

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2.4. Leagues

In order to examine the differences and similarities when observing the different leagues and their clubs, the authors will first have to establish the concept of high- and low ranked leagues. As this study concerns analysing how these leagues are affected in comparison to each other, defining and motivating which subjects the authors will take under investigation are of importance.

Traditionally, models used to analyse competitiveness often concern different ratios regarding, e.g. winning and losing (Criado et al., 2013, p. 1), while some use complex methods of examining the quality in the context of individual players (García‐Cebrián, 2006). These have, somewhat, been touched upon in the sports performance section and lack the ability to measure the quality of leagues as a whole. Although, Criado et al. (2013, p. 2) present a model used for ranking leagues with the help of various variables. Criado et al. aim to describe and calculate families of rankings with the help of a competitivity graph. This graph uses variables in relation to specific time-periods and their data to determine the competitiveness of specific leagues, in this case, Serie A, Liga BBVA, Premier league and Bundesliga. Furthermore, Eryilmaz and Er (2016, p. 786-794), look into the competitiveness within leagues over some time. The authors use a Cramér-von Mises -test to statistically test differences in rank between the top three clubs in the German, Turkish and Dutch leagues. By the help of average scores per game, they investigate the factors which are necessary to end up in a top position in separate leagues.

Even though they disregard from investigating the relation between the leagues themselves, the authors present an alternative to above mentioned methods by using simplified statistics in order to measure competitiveness.

The literature above contain valuable information about how to rank quality, performance and competitiveness to a great extent, but they also lack the ability to clearly position specific leagues in an order. To assess broader information about which leagues are of interest to us, UEFA.com (2020) is the main actor, with a ranking system that presents which position in the system all the European leagues possess. By the help of calculations based on results from the five previous years from the two European cups, UEFA Champions league and UEFA Europa League, it is determined which place each league positions themselves in (UEFA.com, 2020). To simplify, depending on how many teams a specific league has in these cups, and how many points the teams gather, the whole league gathers an average score. Additionally, these two cups can result in financial effects if individual teams perform well enough (Menary, 2015). In relation to the research question, proceeding to these cups can therefore affect financial performance by introducing additional sources of income for the clubs that perform well in the domestic leagues. However, specific financial effects of taking part in European Cups will not be identified and excluded from our study.

For the authors to decide on whether a league is high- or low ranked, existing literature lack some arguments and guidelines in order to do so. Besides above mentioned studies regarding ranking within leagues, UEFA presents the most appropriate way to examine and choose the leagues of interest. Further investigation leads the authors to the conclusion that information in the context of annual reports was to be found to a great extent for most of the European leagues, presenting the authors with some alternatives.

The authors chose to investigate the English Premier League as a high ranked league as a result of being within the top ranked leagues and presenting financial information. As a

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low ranked league, due to personal interest and a desire to investigate the domestic league of Sweden the authors choose Allsvenskan. Additionally, as mentioned before, Allsvenskan does not possess a rank 20 or higher in the UEFA-coefficients, which in this case qualifies as a low ranked league.

Furthermore, the process of comparing two leagues in the manner the authors intend to demands similarities besides being part of the same industry. Bisceglia et al. (2018) examines the competitive balance between some major leagues in Europe together with the North American football league (MLS). Bisceglia et al. state that regulations and redistribution within sports differ between leagues which thereby can create competitive imbalances within the leagues. This imbalance can then reflect performance in the context of international competitions. In addition to national imbalance, the different regulations observed between Allsvenskan and Premier League cause the clubs to adapt to an alternative way of operating, not least financially (RF.se, 2019). For Allsvenskan, due to regulations issued by relevant organs, the majority of a club is to be owned by the association and its members. In other words, e.g. private investors cannot own majority and thereby not control the club. In Premier League though, this way of working does not present itself, where actors find incentives for investing when regulations for restricted ownership is absence (Wilson et al., 2013). These allowed investments imply an imbalance regarding financial factors and ownership structures between Allsvenskan and Premier League. However, this research will focus on investigating only the relationships between financial factors and sports performance and will not analyse organizational and regulatory factors on a deeper level.

Within the football leagues selected, the clubs participating in a given season are dependent on the previous season’s performance. Every season, three new clubs are promoted from a lower league to compete, while three clubs are relegated from the highest league. The mechanism of “open leagues” are used widely in European football, and it promotes competitiveness within leagues and countries. However that mechanism presents challenges for financial analysis when focusing only on leagues on one level within a country. When the research is focusing on a specific league such as the Premier League and the Allsvenskan, the clubs that are relegated from and promoted to those leagues lack the same time period within the league than the rest of the clubs. While accounting those clubs might present more data for the research and can be said to be important for investigating the sports performance’s effect on finances, it might present some bias in the results as well. However, in order for the authors to present the leagues as a whole, the authors are going to focus on all of the clubs that have been in the specific league in the period under consideration, taking into account the clubs that have performed poorly on the football pitch.

2.5. Hypotheses

Previous research has concluded that improvements in revenues allow football clubs to invest in improvements for the teams. The improved teams then correspond to improvements in sports performance and the improvement in the sports performance then result into increased revenues (Galariotis et al., 2017, p. 606). Galariotis et al. further elaborate that football clubs who enjoy high revenue, often do not enjoy high profits;

football clubs that enjoy high revenue, tend to increase their sports performance; and football clubs with bad financial performance (large amount of losses) often have relatively good sports performance (Galariotis et al., 2017, p. 607). This implies that

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instead of turning that high revenue into distributable profit towards the shareholders, football clubs tend to invest and spend more in order to perform even better in the football field the next season. Pinnuck & Potter (2006, p. 515) concluded in their research considering the Australian football league that attendance is a function of both long-term and short-term success on the football field, and that sports performance does increase attendance of home-games. Since football clubs’ operation revenue consists of matchday revenue (tickets), broadcasting and commercial activities, implying that the increased attendance - caused by the improvements in sports performance - increases revenues of football clubs. Even though this study investigates the effect of financial performance on sports performance, enhanced sports performance, evidently, can affect finances single handedly by, i.e., attracting customers connected to operations.

Based on previous findings suggesting a positive relation between revenues and sport performance, the authors expect to find that this association will be positive both in the Swedish and English leagues. Therefore, our first hypotheses are:

H1a: The relationship between revenues and sports performance is positive in the Premier League

H1b: The relationship between revenues and sports performance is positive in the Allsvenskan

However what comes to the relative operating profit, the authors’ prediction is that there will be differences between the Premier League and Allsvenskan. Those differences will incur due to the relatively larger investments to player fees increasing the costs in the Premier League which lowers the operating profit of those clubs. Hence, the prediction is that the relationship between sports performance and relative operational profit will be stronger in Allsvenskan than in the Premier League, while the relationship between sports performance and revenue will be negative for both leagues, following the findings of Galariotis et al. (2017, p. 606). In addition, factors such as wages and investment into player signings have a positive relationship with sports performance, implying that while the teams are performing well, their revenue increases, but that revenue will not transfer into profits as Galariotis et al. (2017) elaborated, and instead will be spent on wages and player signings. Based on the above facts, the authors formulate the following hypotheses:

H2a: The relationship between relative operating profits and sports performance is negative in the Premier League

H2b: he relationship between relative operating profits and sports performance is negative in the Allsvenskan

H3a: The relationship between wages and sports performance is positive in the Premier League

H3b: The relationship between wages and sports performance is positive in the Allsvenskan

Ferri et al. (2017) found that club size has a positive and significant correlation in the Italian Serie A with sports performance, due to economies of scale and better organizational skills in larger teams (Ferri et al., 2017, p. 43). In addition, assets indicates the amount invested into player contracts. Dimitropoulos & Limperopoulos (2014, p.

137) as well as Ferri et al. (2017 p. 43) found also positive relationships between returns on assets and sports performance, further indicating that higher amount of assets as well

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as return on those assets would have a positive relationship with sports performance.

Following their research, the next hypotheses are:

H4a: The relationship between return on assets and sports performance is positive in the Premier League

H4b: The relationship between return on assets and sports performance is positive in the Allsvenskan

H5a: The relationship between assets and sports performance is positive in the Premier League

H5b: The relationship between assets and sports performance is positive in the Allsvenskan

Finally, the authors expect that over-investing into player contracts will correlate into increased sports performance. This is supported by Lago et al. (2006, p. 9), Dimitropoulos

& Limperopoulos (2014, p. 135) and Ferri et al. (2017, p. 43), who all found that large leverage most likely results into better football performance due to substantial debts directed into player contracts. The leverage ratio that is going to be used in this research will be the debt-to-equity -ratio, which leads the authors to the last hypothesis:

H6a: The relationship between D/E-ratio and sports performance is positive in the Premier League

H6b: The relationship between D/E-ratio and sports performance is positive in the Allsvenskan

In order to answer the research question, the authors created a model to present the approach. The presented theories play a key role in order to construct the relevant hypotheses that the authors’ work will be based upon. The variables chosen are considered to be of importance when investigating effects on sports performance based of financial performance. The authors will look at and compare the English Premier League and the Swedish Allsvenskan based upon reasons mentioned in section 2.4.

Thereafter, the authors will determine that for both simplicity and appropriateness, the authors will focus on final league table at the end of every season as a measurement of sports performance. Even though various methods have been used to measure sports performance, the authors find it suitable to look at positions within the leagues in order to, possibly, find similarities and differences between the two leagues. For statistical purposes, the authors will use the timespan of five seasons between 2014 and 2019.

Additionally, the authors will use the financial variables in order to hypothetically test the correlation and relationships, enabling the authors to determine whether the research question can be answered or not, and to see whether there is a difference between the relationship of those variables and sports performance depending on the leagues. Lastly the authors will analyse the results based on the theory of profit/win maximization.

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3. Methodology

In this chapter, the authors will present the research philosophy, research strategy, research approach and research design, and provide argumentation for the methodological decisions made. The chapter will end by discussing the ethical and societal considerations affecting the research.

3.1. Research philosophy

Research philosophy within social sciences consists of three important aspects - the ontological, the epistemological and the methodological aspects. Understanding those aspects and ensuring that assumptions made within a study are consistent with each other is necessary in order to create valuable knowledge about the selected topic (Bell et al., 2019, p. 26). According to Bell et al. (2019), even though research in social sciences tends to follow standard procedures, all research is influenced by this set of philosophical assumptions (Bell et al, 2019, p. 25) and those assumptions are most likely to be the basis of those standard procedures.

The main idea of the three aspects is to theorize the nature of reality (ontology) (Bell et al., 2019, p. 26), and to understand how one can derive knowledge from that reality (epistemology) (Bell et al., 2019, p. 29) and lastly distinguishing that knowledge into quantitative or qualitative (methodological) (Bryman, 2016, p. 31). Saunders et al. (2009) further argue, that the ontological and epistemological approaches chosen by the researchers, will then underpin the research strategy of the study (Saunders et al., 2009.

p. 108). Furthermore, Saunders et al. emphasizes the importance of reflecting over the philosophical choices made and defending those in relation to the alternatives that could have been chosen (Johnson & Clark, 2006, cited in Saunders et al., 2009, p. 108), thus an in-depth understanding of the assumptions and the differences between them is necessary to enhance the understanding of how the whole research will be approached. The philosophical choices adopted will then reflect to the particular view of the relationship between knowledge and how it was developed (Saunders et al., 2009, p. 108).

Within this research, those questions and choices will circle around the how the authors understand the knowledge within the football industry, how the authors derive that knowledge from it and based on those choices, if the authors distinguish that knowledge into quantitative or qualitative. The philosophical choices made, will guide the authors to answering how the knowledge is then developed and understood. Since Bell et al. (2019) and Saunders et al. (2009) both argue that the relationship between the three philosophical aspects is directional, the authors will analyse the aspects in the same order - ontological, epistemological and methodological.

3.1.1. Ontology

As mentioned above, the main idea of ontology is to theorize the nature of reality (Bell et al., 2019, p. 26). According to Bell et al. (2019), ontology questions whether a social phenomenon exists objectively, external of the influences of the observers, or whether they exist due to the meanings the observers give to that phenomenon (Bell et al., 2019, p. 26). Moreover, ontology reflects to the assumptions the researchers have about the reality and how the world operates (Saunders et al., 2009. p. 110). The ontological decision will determine what it is, that will be studied and created knowledge from, and

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by understanding, help to design the research in a way most acceptable to capture that knowledge (Bell et al., 2019, p. 26). A commonly used distinction within the different ontological approaches is to categorize them into objectivism and constructionism/subjectivism.

Objectivism is a position which assumes that phenomena exists independently from social actors, and therefore cannot be influenced by the actors within (Saunders et al., 2009, p.

110). Furthermore, according to the objectivism, a social phenomenon exists whether the observer is aware of it or not (Bell et al., 2019, p. 26). In terms of the field of business and finance, the objectivist approach claims that organizations exists external of the people in the organizations (Bryman et al., 2016, p. 29) and therefore the actions of organizations would exists whether or not someone would measure them or not. The objectivist approach therefore emphasizes that reality consists of individual and solid objects that are measurable (MacIntosh & O’Gorman, 2015, p. 56).

Contrary to objectivism, constructionism (or sometimes called subjectivism) regards social phenomena, such as organizations, as entities which exists due to the actions of humans (Bell et al., 2019, p. 28). In other words, constructionism claims that reality is are made real by the social constructions and actors in it, in an ever-changing way (Saunders et al., 2009, p. 111). Saunders et al. (2009), further elaborate that individual people within a reality will experience situations in different ways according to their own realities, and these experiences and interpretations will then affect their actions towards others. Those interpretations and actions then revise the reality, due to the assumption that phenomena exists because of the actors in it. MacIntosh and O’Gorman (2015) simplifies the definition, that the subjective perspective looks at reality as perceptions and interactions of humans, and that it is the perceptions that makes the reality (MacIntosh & O’Gorman, 2015, p. 56-57).

This research is studying the relationship of financial performance and sports performance, and further comparing the results between the Premier League and Allsvenskan. Since the objectivist approach pays attention to the individualism of objects, it is more suitable for this research. For example, in order to study the sports performance, determining the factors that affect the sports performance to the single actor by the constructionist approach would be time consuming and would not serve the purpose of this study. The objectivist approach will then be more suitable, since it emphasizes the independence of phenomena rather than the interconnectedness of phenomena and actors.

Defining how the authors of this research understands reality, it is then important to distinguish how the authors will derive knowledge from that reality.

3.1.2. Epistemology

Epistemology - or the theory of knowledge - will imply that an understanding of knowledge can be gained from an ontological reality (Bell et al., 2019, p. 29).

Adopting a constructionist ontology would mean that knowledge can be gained by observing and interviewing actors within a reality, in order to understand how the actors shape and understand that reality (Bell et al., 2019, p. 29), while objectivist ontology emphasizes that knowledge can be derived by measuring aspects of the reality (Bell et al., 2019, p. 29). That distinction within epistemology is called positivism and interpretivism (Saunders et al., 2009, p. 113).

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The philosophy of positivism derives knowledge and creates generalizations of that knowledge (Saunders et al., 2009, p. 113). The positivist approach produces data, which then can be interpreted through theories, and further tested through hypotheses.

Those hypotheses will then either be proved true or false, leading to further development of the theories (Saunders et al., 2009, p. 113). Saunders et al. (2019) motivates, that positivism assumes that the researchers are independent from the data, and therefore cannot affect or be affected by the data.

Interpretivism however claims that studying the social reality requires a different approach for the research (Bryman, 2016, p. 26). Interpretivism, as the name indicates, tries to interpret and understand human reality, rather than explain it (Bryman, 2016, p. 26), and that the interpretivism approach is more suitable for qualitative studies that aim to understand in-depth the various relationships in human reality (MacIntosh &

O’Gorman, 2015, p. 59). The differences between the positivist and interpretivist approaches are visualized by MacIntosh and O’Gorman in Table 2 (2015):positivist and interpretivist approaches are visualized by MacIntosh and O’Gorman in Table 2 (2015):

Figure 2, Positivist and interpretivist approaches. Source: MacIntosh &

O’Gorman (2015, p. 60).

Since the ontological approach of this research is objective, it would imply that the positivist epistemological stance is more suitable. This research is studying the relationships of individual factors, generalizing data from large samples in order to understand and develop theoretical approaches. Since the interpretivism approach focuses on understanding the meaning of those relationships, it is less suitable for this research, and therefore the positivist approach is selected.

3.1.3. Methodological choice and research strategy

According to Saunders et al. (2009, p. 3), the term methodology often refers to how the research should be conducted. The research strategy determines the general orientation that this research will take. The research strategy can be distinguished into two different forms: quantitative research and qualitative research (Bryman, 2016, p. 32). Quantitative research can be described as a research strategy, that focuses on quantification of data, while qualitative research focuses more on words and their meanings (Bryman, 2016, p.

32).

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Derived from the two previous sub-chapters, the indications from the objective and positivist approach would imply that the best approach is the quantitative

approach. Moreover, since the qualitative approach focuses more on interpreting and understanding phenomena, it would not serve purpose in this research. Qualitative research is also often linked with interpretivism and constructionism, and selecting qualitative over quantitative would be in conflict with the philosophical choices of positivism and objectivism. In order for the authors to prove whether or not there is a relationship between the financial performance and sports performance of football clubs, the quantitative approach of studying a large sample of data and making generalizations based on it is more suitable.

3.2. Research approach

Following the philosophical aspects of this research, comes the approach that this research will use in order to study the theoretical aspects considering this study.

The research approaches used in research are the deductive and the inductive approaches. The deductive approach uses a theory and a hypothesis as a basis for understanding data, while the inductive approach focuses on collecting data and creating a theory based on the analysis of that data (Saunders et al., 2009, p. 124).

The deductive approach involves the development of a theory, which is then tested (Saunders et al., 2009, p. 124) and deductive research can be divided into five stages:

Figure 3: Deductive approach. Source: Robson, 2002, cited in Saunders et al., 2009, p. 124.

Saunders et al. (2009) further elaborates on those five stages: the first part of the deductive research involves deducing a testable hypothesis about the relationship of two or more variables from a theory. It will then continue by describing how the variables within the hypothesis will be measured, and then testing those variables for relationships. Then, the research will continue by examining whether or not the theory can be confirmed based on the tests, or if the theory will require modification (Saunders et al., 2009, p. 124-125).

The inductive approach, however, develops an understanding of the way humans interpret the social world (Saunders et al., 2009, 126). Inductive research is often characterized by small samples and the use of qualitative data (Saunders et al., 2009, p. 126) and it uses the qualitative data as the basis for creating a theory. Moreover, the inductive approach often emphasizes a closer understanding of the context of the research, as well as the meanings humans attach to certain events (Saunders et al., 2009, p. 127).

Since this research is studying the financial aspects of football with the help of quantitative data, and since the purpose is to investigate and generalize the relationship financial performance has on sports performance, the deductive approach will be more

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suitable for the research. Moreover, the deductive approach will help to study the differences that chosen variables have between different leagues in different countries.

3.3. Research design

Research designs are categorized into three different groups, depending on the function and the phenomenon that the research will study. The three approaches are exploratory, causal and descriptive research designs (Hair et al., 2011, p. 147).

Exploratory research is used in order to discover new phenomena and it is not intended to test specific hypotheses (Hair et al., 2011, p. 147). Moreover, Hair et al.

(2011) explains that exploratory research relies more on qualitative approaches.

Causal research design is the most complex of the three. It is used in order to test whether one event causes another event and causal research depends on four conditions: time sequences, covariances, nonspurious association and theoretical support (Hair et al., 2011, p. 153). Finally, the descriptive research designs obtains data that describes characteristics of a certain phenomenon, and it commonly uses hypotheses that are derived from theories (Hair et al., 2011, p. 148). Furthermore, descriptive research designs rely on measurements of a sample, in order to describe the population (Hair et al., 2011, p. 150). Since the research will be investigating the relationship of two or more variables, in order to describe the characteristics of the football world, and due to the relationships being investigated by testing hypotheses, the descriptive research design is the research design of choice. Further elaborations of choices within the descriptive research design will follow next.

Descriptive studies can be either cross-sectional or longitudinal. In cross-sectional studies data is collected over one period of time and it is assessed statistically (Hair et al., 2011, p. 149) and cross-sectional studies aim to describe a population based on the sample (Levin, 2006, p. 24). In comparison, longitudinal studies describe phenomena over a longer period of time, rather than only one time period.

Longitudinal studies are used in order to investigate how hypotheses and variables vary over time, and longitudinal studies require data collection of the same sample multiple times (Hair et al., 2011, p. 150). Furthermore, longitudinal studies can be identified as either panel studies or cohort studies. Panel studies uses the same sample as the basis of the research over two or more time periods, while cohort studies use a different sample with similar characteristics over a longer period of time (Walliman, 2016, p. 38).

Again, as explained in the theoretical chapter of this research, the sample will consist of multiple football teams, in both Swedish and English leagues, and over a period of time of three years, which suggests that this research will use the longitudinal approach. The aim of this research is to investigate how the sports performance affects financial performance, which requires the examination of multiple time periods, in order to see the possible changes in financial performance and sports performance.

3.4. Literature search and source criticism

According to MacIntosh and O’Gorman (2015), the purpose of a literature review is to get an in-depth understanding of the topic and the literature covering the topic, before proceeding to justificate or argumenting about it (MacIntosh & O’Gorman, 2015, p. 31).

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The literature review aims to provide a background for arguments and motivations and it will result into the theoretical framework of the research (Collis & Hussey, 2015, p. 11).

MacIntosh & O’Gorman (2015) further elaborate that the literature review also requires continuous evaluation and critique over the sources used, and that the sources should be obtained from academical databases (MacIntosh & O’Gorman, 2015, p. 36 & 41).

Those key points have been used as inspiration throughout this research. Firstly, literature considering finances and sports were inspected in order to gain an in -depth understanding of the topics, and further widen the knowledge surrounding the financial world of football. Secondly, the literature has been gathered from sources such as the Google Scholar and Umeå University library’s database, in order to ensure that the literature reviewed has been peer-reviewed and reliable. In addition, where applicable, a method known as “backward searching” (Paulus et al., 2014, cited in MacIntosh & Gorman, 2015, p. 38) has been used. Backward searching is simply the act of going through reference lists of articles in order to further deepen the understanding surrounding the topics. The sources used in this research has mostly been primary sources with some exceptions. The exceptions have incurred mainly due to issues with accessing certain articles and books used for this research, such as Sloane’s article from 1971, which has been cited in almost all the literature considering the finances of professional football. Lastly, the literature review has resulted into a theoretical framework and hypotheses that are going to be tested. The hypotheses and framework were formed based on the knowledge gathered from the literature review.

3.5. Ethical considerations

MacIntosh & O’Gorman (2015) states that addressing ethical and societal aspects considering a research is important due to three reasons: it helps to navigate within a sensitive topic, it improves the outcomes of the research and it ensures that the research will be conducted professionally. Sensitive topics emphasizes the different views that different parties may have, and that taking those views into consideration is important when making ethical decisions (MacIntosh & O’Gorman, 2015, p. 197). The ethical decisions might include decisions considering the potential impact that the research can have on the ones participating in the research. The second reason - improved outcomes - gives valuables insights for the evaluation of a research and its relevance.

By addressing where the possible sources have been gathered from, who has been participating in the research, and how the research was conducted, it ensures that the research has been made ethically and can be deemed as relevant within that field (MacIntosh & O’Gorman, 2015, p. 198). Lastly, taking the ethical aspects of a research into consideration also ensures that the code of conduct of institution, as well as adopting good practices helps to improve the credibility of the research (MacIntosh &

O’Gorman, 2015, p. 198-199).

MacIntosh and O’Gorman (2015) proceed to list four key ethical aspects to take into account when conducting research: harm to participants; informed consent; deception;

and participants’ right to privacy. According to MacIntosh and O’Gorman, if conducting a research causes harms to the participants of the research, it is considered to be unethical (MacIntosh & O’Gorman, 2015, p. 200). While the research might not cause any harm to the participants, it might still be considered unethical. The second key ethical element addresses the issue, that the participants of the research has to be informed that they are participating, ensuring that the participants have been provided with sufficient information and can decide whether or not they want to participate

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(MacIntosh & O’Gorman, 2015, p. 201). Deception refers to the lack of and the quality of the information given to participants. Possible deceptions considering research might give valuable results (such as not telling consumers that they are participating a research, in order to get the most natural reaction), however it needs to be well-argued for and fully thought through (MacIntosh & O’Gorman, 2015, p. 202-203). Finally, the information gathered from the participants have to be ensured to be confidential, possibly anonymous, and safe in order to ensure the participants’ right to privacy (MacIntosh & O’Gorman, 2015, p. 203).

This research aims to investigate the relationship between sports performance and financial performance, and the data gathered in this research is accessed from publicly available sources, such as annual reports of football clubs and information considering the end-season league tables. While one could argue that the football clubs are participators of this research, the information gathered from them is publicly available financial information, and the authors consider that the possible harms considering the use of that information are minor or non-existent. In addition, the other ethical issues regarding privacy, deception and consent are not ethical issues faced by the authors.

Moreover, the authors aim to be transparent and reliable by documenting the research process, using and referencing to academically relevant sources, and using acceptable statistical methods which will be explained in the next chapter.

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4. Research Method

This chapter will describe the steps of practically collect data and how this will enable the authors to carry out the analysis. As mentioned, the authors will use quantitative research with a positivist approach. By presenting sample selection and variables in a structurally clear way, the authors aim to create understanding from the reader’s perspective and justify the chosen variables. The authors will present the sample, variables, and different analytical tools that are going to be used in order to test the chosen hypotheses.

4.1. Sample

Sampling is necessary as it would be too time consuming and impractical to use the full amount of football leagues to examine a phenomenon (Saunder et al., 2009). As the authors want to investigate the differences between high ranked leagues and low ranked leagues there is two samples to consider. As already presented, these are the Premier League and Allsvenskan. Premier League thereby represent the population of high ranked leagues and Allsvenskan was the chosen sample as low ranked.

Given this information, data had to be of appropriate amount, quality and availability in order to proceed with desired analysis. Once the mentioned factors were controlled, targeted data consisted of the two leagues, over a period of 5 seasons (2015-2019).

This information was gathered from the websites of Svenska fotbollsförbundet (SvFF) and Premier League respectively. For Allsvenskan the sample consisted of 16 clubs per season. Regarding Premier League, the sample consisted of 20 clubs per season.

Due to the amount of data and time limitations, the authors decided not to examine additional samples to study the relationship between sports performance and financial performance. The authors thereby want to urge readers to interpret the results followed by this study with caution. As the authors only use two leagues representing high- and low ranked leagues the authors cannot guarantee that the same results occur when studying alternative situations. Furthermore, in some cases the financial information of specific clubs was not accessible. Since the two leagues are located in countries with different currency, the authors decided to transform the currency. The decision was to change the currency used in the financial information of the Swedish Allsvenskan from the Swedish krona to the British pound. The exchange rate is from 28th of April 2020, and it values one Swedish krona as £0,081.

As mentioned earlier, the data was gathered from two leagues over five seasons.

However, in some cases - especially in the Allsvenskan - there were some missing values due to accessibility issues. For example GIF Sundsvall have not published their financial reports and therefore will not be included in the observations. In addition, for the 2014/15 season, the five lowest ranking clubs had missing financial information, making the sample size for that season n = 11 instead of n = 16. Due to the fact that the authors cannot access that information within the time limit of this research, the missing values for the season 2014/15 might increase the overall financial results. Furthermore, the Premier League clubs Crystal Palace FC and Newcastle United had not yet released their financial reports for the season 2018/19 when this research was conducted, and will therefore be absent from that season’s observations. However, since the sample consists of multiple observations over the timespan of multiple seasons, the authors have decided to continue without those specific observations.

References

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