Development of the Football Stock Market The Impact of Financial Development and Shareholder Protection

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Development of the Football Stock Market

The Impact of Financial Development and Shareholder Protection

Ton van der Kooi

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June, 2012

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Master Thesis

Abstract

This thesis investigates the influence of financial development, which is formed by stock market development and development of financial institutions, and shareholder protection at the country level on the total value and market liquidity of football clubs’ stocks. Financial development and shareholder protection are found to be strongly related with the development of stock markets in general. Considering important differences between the football industry and other industries, this thesis is aimed to show that financial development and shareholder protection would also be the main drivers for the development of the football stock market. The results show that total market capitalization of football clubs is significantly and positively influenced by financial development, and by both its components stock market development and development of financial institutions, but that shareholder protection doesn’t have a significant influence. On the other hand, neither the financial development indicators nor the shareholder protection have a significant influence on the liquidity of football stocks. These results indicate that through the differences with other industries, financial development and shareholder protection have a different role in the football industry.

Author: Ton van der Kooi

Supervisor: Dr. H. Gonenc

2nd Supervisor: Dr. R. Koning

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1. Introduction

In 2007, the Fédération Internationale de Football Association (FIFA) stated that almost 265 million people around the world played football. Moreover, in 2011 the FIFA announced that the FIFA World Cup final in 2010 in South-Africa was broadcasted in every country in the world and was seen by more than 3.2 billion people, which is around 46.4 percent of the world population. These numbers indicate the great popularity of the football sport and its great social function around the globe. Besides the social function of the football sport, the money circulating in the football market is growing

impressively. The total revenues of the 20 richest football clubs in the world increased from €1.2 billion in the season 1996/1997 to €4.4 billion in the season 2010/2011, according to research of Deloitte (2005, 2012). Moreover, despite the challenging economic environment, the total European football market grew from 14.6 billion in 2007/2008 to €15.7 billion in 2008/09 and to €16.3 billion in 2009/2010 (Deloitte, 2008, 2009, 2010).

In order to finance their major investments, football clubs have offered their stocks to the public to raise external equity capital. Tottenham Hotspur was the first publicly listed football club, with their Initial Public Offering (IPO) in 1983. Several clubs from different countries followed the example of Tottenham Hotspur and also listed their IPOs. The number of listed football clubs had its peak between 1999 and 2003 when there were almost 40 publicly listed football clubs. After this period, a downward trend was perceived, mainly because of a wave of football clubs delisting from the stock exchange in the United Kingdom (Aglietta et al., 2010). The two most important reasons for the high number of delisting football clubs were insolvency problems and take-overs by wealthy business people (Deloitte, 2009). However, in contrast to the wave of delisting football clubs in the U.K., clubs from other countries found their way to the stock exchange and listed their IPO. For example, national top clubs Benfica from Portugal en Olympique Lyon from France went public in 2007. These different developments in different countries indicate that national factors can influence the decision of football clubs of being publicly traded.

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clubs. Football clubs operating with a soft budget constraint can continuously spend more than its revenue in order to obtain sportive success, without going bankrupt (Aglietta et al. 2010). Public listed football clubs are less likely to have such a soft budget constraint, because they have to act in the interest of shareholders, which normally require a higher return on their investment relative to the less risky investment alternatives. However, previous studies find that investors in football stocks are emotionally linked to football clubs and therefore they are less profit-oriented than other shareholders. For investors in football stocks, protection against expropriation of management of other more

informed traders seems less relevant than for investors trying to maximize profits.

This study investigates the influence of financial markets, financial institutions and shareholder protection on the development of the football stock market from different countries by considering the fact that these factors are major determinants of stock market development in general. The question of how these factors influence stocks’ values of football clubs require empirical investigation because previous studies find several important differences between the football industry and other industries (Dietl et al., 2008; Farquhar et al., 2005). In contrast to other commercial organizations the objective of football clubs is to maximize utility instead of profits (Sloane, 1971). Consequently, football clubs operate in an overinvestment culture which causes a weak governance of football clubs in terms of shareholder profits (Franck, 2010). Through these differences, it could be expected that financial development, at the forms of stock market development and development of financial institutions have a different relation with the football industry than with other industries. By using findings for financial development and shareholder protection and findings for the football industry, this study combines two fields of research that were separated before.

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The outline of the paper is as follows. First a theoretical background is provided from financial and sports literature. The first part of this theoretical background describes the relevance of overall financial development, the roles and relevance of stock market development and development of financial institutions and shareholder protection. The second part discusses the football industry in general and the football stock market more specifically. After this, the fields of financial development and the football industry are combined and the research question and hypothesis are formulated. This will be followed by the data and methodology section. Then, empirical results will be presented and discussed. At last, this paper provides conclusions, research limitations and directions for further research.

2. Theoretical Background

2.1 Financial Development

Financial development has been mainly investigated in relation with economic growth. In 1911, Schumpeter emphasized the potential importance of financial development for economic growth. In more recent years, an extensive body of literature confirm the relation between financial development and economic growth, by investigating this relation empirically. Goldsmith (1969) proves the strong relationship for a few countries and King and Levine (1993) empirically show a significant positive link between development of the financial system and economic growth, using data for 80 countries. Following King and Levine (1993), several other authors also find close ties between financial

development and economic growth. The benefits of a financial system, according to Chakraborty and Ray (2007), mainly depend on the access to external finance. With access to external finance, firms can facilitate industry growth, since the need for external finance depends on the difference between the investment opportunities and the internal cash flows within a firm (Demirgüç-Kunt and Maksimovic, 1998). Rajan and Zingales (1998a) argue that well developed financial systems reduce the cost of external finance for firms. According to Love (2003) and Khurana (2006) financial development reduces financing constraints because it reduces information asymmetries and contracting imperfections between management and capital suppliers. When there are less information asymmetries and contracting imperfections, the costs of external finance are reduced. With less constraint for external financing, firms are able to invest more in profitable projects and capital is better allocated (Love, 2003).

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Kunt and Maksimovic (1998), it is important to have a well-developed financial system because both stock markets and financial institutions are major capital sources for firms, and provide information to investors about firms’ activities. The presence of well-developed financial markets and institutions, allows firms to increase external capital sufficiently and at a lower cost.

The level of financial development is determined by both stock market development and the development of financial institutions, including banks and financial intermediaries. There is an extensive body of literature, focussing on the role of stock markets and financial institutions in economic activities.

2.1.1 Stock Markets

In literature, similar to financial development in general, stock market development has mainly been topic of research in relation with economic growth. Stock market development has a significant positive relation with economic growth (Demirgüç-Kunt and Maksimovic, 1998; Levine and Zervos, 1998). According to Levine and Zervos (1998) high liquidity is the most important characteristic of stock markets. Also a body of literature investigates the relationship between stock market development and development of financial institutions and showed that there is a significant and positive relation

between stock market development and the development of financial institutions. (Demirgüç-Kunt and Levine, 1996; Levine and Zervos, 1998)

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ownership is traded, but without the disruption of production processes occurring within firms (Levine, 1991). In addition, stock markets provide the opportunity to investors to manage their risk, by holding diversified portfolios. Fifth, according to Jensen and Murphy (1990), corporate governance is enhanced by stock markets. Firm performance and a firm’s value can be derived from the stock price, which makes it possible to link managerial compensation to the stock price and could play a role in takeovers.

Previous to the study of Demirgüç-Kunt and Levine (1996), several indicators had been used to measure the development of stocks markets. Demirgüç-Kunt and Levine (1996) collect and compare multiple stock market development indicators. They find large cross-country differences in the level of stock market development as measured by each indicator. They also find that the single stock market indicators are highly correlated. For example, the size of stock markets is highly correlated with low volatility and high liquidity in the market. Countries which are characterized by strong information disclosure laws have on average more liquid and larger stock markets (Demirgüç-Kunt and Levine, 1996).

From the 1970s to the 1990s, stock markets became more developed in terms of size, efficiency and activity (Demirgüç-Kunt and Levine, 2001). For the more recent years, Beck and Demirgüç-Kunt (2009) find a deepening of stock markets up to 2008. This deepening is mainly caused by an increase in market capitalization and less by an increase of market liquidity.

2.1.2. Financial Institutions

In literature, similar to both overall financial development and stock market development, development of financial institutions is mainly investigated in relation with economic growth. Development of financial institutions has significant and positive relation with economic growth (Demirgüç-Kunt and Levine, 1996; Demirgüç-Kunt and Maksimovic, 1998; King and Levine, 1993; Levine and Zervos, 1998). As shown before, financial institutions do also have a significant and positive relation with stock market development (King and Levine, 1993; Levine and Zervos, 1998).

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In 1911, Joseph Schumpeter emphasized as one of the first the importance of the role of financial intermediaries, by indicating that financial intermediaries provide services, which are essential for economic growth. Collin (1997) points out three main roles of financial institutions. First, financial institutions have to pool the savings of depositors to make it appropriate for investments in firms demanding for external finance. The selection of which firms to supply with credit is the second role. To identify the right borrowers financial intermediaries acquire information about firms. By reducing information asymmetries, financial institutions improve capital allocation and corporate governance (Diamond, 1984). Moreover, Rajan and Zingales (1998b) state that banks are better in the ensuring of information disclosure and debt payments than stock markets. The third function of financial institutions according to Collin (1997) is to monitor the firms which have received external capital. According to Holmström and Tirole (1997) banks do have an important role in monitoring, because they possess a unique monitoring technology. They state that through this monitoring technology, banks can inspect the activities of a borrowing firm and can put pressure on firms that they act upon the conditions in the financial contracts.

Goldsmith (1969) finds that the ratio of the size of banks versus the size of non-bank financial institutions tend to decrease in most countries, when they develop. From 1960 to the 1990s, both banks and other financial institutions became larger relative to Gross Domestic Product (GDP) over time (Demirgüç-Kunt and Levine, 2001). For the more recent years, Beck and Demirgüç-Kunt (2009) find a deepening of financial institutions over time and across the world until 2008.

2.2 Shareholder Protection

In addition to the roles of bank and market based financial systems, the law and finance view indicates that legal factors are important for financial development and economic growth. Pioneers in this field are La Porta et al. (1997, 1998), focussing on the relation between shareholder protection and financial development. La Porta et al. (1998) and Demirgüç-Kunt and Levine (2001) state that differences in shareholder protection helps to explain why firms from different countries are financed so differently.

”Laws differ markedly around the world, though in most places they tend to give investors a rather limited bundle of rights” (La Porta et al., 1998, p. 1151). The rights attached to securities are not

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Ergungor (2004), countries with civil-law traditions often have bank-based financial systems because they are less adaptable and flexible in an environment of incomplete contracts than common-law countries.

La Porta et al. (1997) find that in a good legal environment, capital suppliers are protected against expropriation by a firms’ management. Shareholder protection raises the willingness to buy securities and therefore increases a firms’ access to capital markets. Shareholder protection has a strong and significant positive influence on stock market development (La Porta et al., 1997, 1998). Investor protection diminishes financing constraints for firms, reduces the costs of external market finance and contributes to more financial development of a country (Demirgüç-Kunt and Maksimovic, 1998; Love, 2003). In addition, according to La Porta et al. (2000), stronger shareholder protection has a positive impact on a more efficient resource allocation across firms and on economic development.

2.3 The Football Industry

2.3.1 Utility maximization and Overinvestment

There are several important differences between the football industry and other industries, which make the football industry a special type of business. The first important difference is reflected in the question what the principle objective of the management is. The main objective of firms from other industries is to maximize the value for its shareholders, in terms of a financial point of view. In economic terms, this is translated as the maximization of profits. However, literature has a different view on the main objective of football clubs. Sloane (1971) states the main objective of football clubs is the maximization of utility, in contrast to firms from other industries which have more focus on profits. According to Kesenne (1996) the main objective of football clubs is to maximize the win-percentage. Koning (2003) argues that financial measures of success are less relevant for football clubs than for firms from other industries. In addition, Franck (2010) argues that football clubs and firms from other

industries cannot be measured against the same performance criteria, as long as financial profitability has a different role in the football industry as in other industries.

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overinvestment is more typical for the sports industry. The tendency to overinvest in the football industry is “a direct consequence of the ruinous competition between the clubs” (Dietl et al., 2008, p. 353). When a football club improves its position in the league table this always worsens the position of another club. When there is a positive relation between economic and sportive success, this may result in overinvestment and destructive competition within the football industry (Dietl et al., 2008). Hall et al. (2002) find that a significant influence of higher salaries on sportive success cannot be rejected.

Moreover, Franck (2010) states that football clubs’ spending power determines their competitive position. Clubs with more spending power have a competitive advantage to obtain sportive success. This finding is supported by the sportive success of Chelsea and Manchester City in the season 2011/2012, where Chelsea won for the first time in history the Champions League and Manchester City became the champion of the English Premier League. Both clubs have spent a lot of money in the transfer market in recent years.

Farquhar et al. (2005) and Dietl et al. (2008) find that the overinvestment problem increases when there is an opportunity for promotion or relegation in national leagues. Furthermore, the tendency to overinvest also increases when the sharing of revenues of clubs from the same league decreases, the difference in revenue between different national leagues increases, and the importance of an additional prize increases (Dietl et al., 2008). Growth in inequality between the leagues may encourage clubs from lower divisions to overspend on players and salaries in an attempt to gain promotion. The combination between utility maximization and the positive relation between more spending power and performance on the field, leads to an increasing tendency to overinvest. A focus on better sportive performance, often leads to irresponsible high expenses to obtain these results.

An example of this opportunistic behaviour of football clubs is given by Dietl and Franck (2007), describing the financial situation of the German football club Schalke 04. In order to obtain short-term sportive success, management borrowed against the club’s future. In 2003, the management of Schalke 04 decided to securitize future revenues for the upcoming 23 years. It raised more the €80 million and used this money to spend money on transfers and salaries. Around 2004, the debt of Schalke was around 110 million. However, it continued to spend money on transfers to obtain short-term success, with the expectation that future revenues would cover its current expenses. However, Schalke didn't obtain its expected sportive success and expected future revenues were forced to be corrected down. The club was in serious distress.

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of all European football clubs in 2010 reached 1.6 billion Euros. In 2006, this was ‘only’ 216 million Euros (VI, 2012). In their attempt to curb overinvestment in the football industry, the UEFA introduced the financial fair play concept in 2009. On 21 March 2012, the UEFA and the European Commission provided a joint statement towards financial fair play in the football industry. Important objectives of the

financial fair play concept are to improve the financial capability of football clubs, improve governance and protect the long-term viability of football clubs. Football clubs should operate on the basis of their own revenues and therefore cannot spend continuously more money than its revenue.

2.3.2 Overinvestment and going public

In order to finance their major investments, some football clubs have decided to issue stocks to the public. The money obtained from stock markets, provides clubs the opportunity to invest more in playing talent, with the aim to maximize utility. However, Russel (1997) points out that that a public listing could have negative effects on the sportive success of football clubs. He suggests that football clubs sportive performance could be negatively influenced by an IPO, because the discipline of financial markets changes the investment decisions of football clubs in the transfer market. This is also stated by Baur and McKeating (2011), who indicate that the overinvestment environment in the football industry may have an effect on the decision of football clubs to go public. In addition, Franck (2010) argues that because the competitive position of football clubs is determined by the clubs spending power, the structure of clubs listed on a stock exchange is inferior to the structure of privately owned football clubs. Financial losses sometimes don’t bother wealthy private owners like Malcolm Glazer, Roman

Abramovich and Mohammed Al Fayed, because these losses in the football industry may still be good for some other reasons. For example, losses in the football industry can enhance the profits in other

industries or private owners are willing to pay for social and political acceptance (Franck, 2010). The average shareholder of public listed football clubs is less willing to sacrifice money to obtain sportive success.

2.3.3 Investor sentiment, stock market performance and value uncertainty

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because of investor sentiment, which cause an overreaction in the stock market. These abnormal returns are not reflected by rational expectations. Palomino et al. (2008) also state that investors in football stocks should use information provided by bookmakers in the betting market, because these odds are quite accurate in predicting the outcome of football games. In efficient regular stock markets, newly available information is directly incorporated into the share price. Theoretically the share price of a firm is the discounted future cash-flows and game results are an important determinant of these future cash-flows. However, in the football market, investors don’t use accurate betting odds around the outcomes of football games, but the final result of the games cause an overreaction in the market due to investor sentiment (Palomino et al., 2008). These findings indicate that investors in football stock are less rational and are more guided by emotions than profit oriented investors

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2.3.4 Developments in the Football Stock Market

Since 1983, about fifty football clubs have listed an IPO in the stock markets. Aglietta et al. (2010) find that most of the clubs issued stocks to the public in the period between 1990 and 2000 and that the number of listed football clubs peaked in the early 2000’s. Since then, a wave of delisting occurred in the United Kingdom. This high number of delisting firms in the football stock market is in contrast to observations in other new industries (Aglietta et al., 2010). From the approximately 30 football clubs that have issued stocks in the market within the UK, only some remain. Figure 1 shows some key trends in the English Premier League clubs financing since 1992 (Deloitte, 2009). ”While some

clubs have opted for a delisting to reduce the regulatory burden and associated costs, over the past years many of the delisting have resulted from new owners taking a club from public to private ownership”

(Deloitte, 2009, p. 58). An example of a delisting to reduce the associated costs is Tottenham Hotspur, which was the oldest football clubs listed on a stock exchange ever, since their IPO in 1983. The “Spurs” delisted themselves on the 16th of January 2011. According, to the chairman of Tottenham Hotspur, Daniel Levy, the costs of the listing on the Alternative Investment Market (AIM) would restrict the opportunities to expand its stadium (The Guardian, 2011). Probably the most famous example of a delisting due to an ownership change is Chelsea, which disappeared from the stock market, after the takeover of Roman Abramovich in 2003.

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Figure 1: Key trends in Premier League clubs’ financing since 1992. (Source: Deloitte Annual Review of Football Finance 2009)

Figure 2: Premiership clubs takeovers by non-UK nationals as majority owners. (Source: Deloitte Annual Review of Football Finance 2007)

In contrast to the wave of delisting in the United Kingdom, there was no delisting of football clubs in most of the other countries. As a matter of fact, there were even clubs that listed their first IPO. Benfica from Portugal and Olympique Lyon from France went public in 2007, a time were the major part of the clubs from the United Kingdom already delisted from the stock exchange. Figure 3 shows that in 2000, the U.K. had the most developed football stock market in terms of market capitalization.

However, after 2000 the football stock market in de U.K. declined. In contrast, figure 3 displays that the size of the football stock markets of Turkey and Portugal grew impressively from 2000 onwards.

Club Deal date Buyer Country Initial deal value Price/Turnover

Fulham May 1997 Mohammed Al-Fayed Egypt €45m 15.0

Chelsea July 2003 Roman Abramovich Russia €195m 1.2

Manchester United May 2005 Malcolm Glazer USA €1,050m 4.6

Portsmouth January 2006 Alexandre Gaydamak France €100m 1.9

Aston Villa August 2006 Randy Lerner USA €110m 1.5

West Ham United November 2006 Eggert Magnusson and

Bjorgolfur Gudmundsson

Iceland €155m 1.8

Liverpool March 2007 Tom Hicks and George

Gillet

USA €317m 1.8

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Figure 3: Total market capitalization of football clubs in different countries from 2000 to 2008.

Aglietta et al. (2010) state that strengthening a football clubs budget constraint is an important determinant for the success of a football clubs’ IPO. However, a problem in the football industry is that in some countries, football clubs operate with a soft budget constraint. ” A soft budget constraint refers

to a situation in which a firm can continuously spend more than its revenue for years (or forever) without going bankrupt” (Aglietta et al., 2010, p. 15). Aglietta et al. (2010) indicate that banks, (local)

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2.4 Research Question and Theoretical Framework

In the first part, I showed the roles and importance of financial development, its components stock market development and development of financial institutions, and shareholder protection. I also discussed that all the concepts are related with the development of stock markets.

In the second part, I discussed important characteristics of the football industry. There are important differences between the football clubs from the football industry and firms from other industries in general and between football stocks and regular stocks more specifically. Moreover, Aglietta et al. (2010) suggest that national and local financial institutions directly influence the financing decision of a football club, by softening its budget constraints. The potential influence of national factors on the financing of football clubs is also seen by financing trends in the football market, which are very different within different countries. Do, despite the differences between the football industry and regular business, the financial development and shareholder protection have the same relation with the football stock market as they have with the development of stock markets in general? The research question of this study is:

What is the influence of financial development and shareholder protection on the development of the football stock market?

Previous studies find that market capitalization and liquidity are the most important characteristics of stocks markets (King and Levine, 1993; La Porta et al., 1998; Levine and Zervos, 1998). Therefore, the development of the football stock market is measured at the forms of market capitalization and liquidity. The theoretical framework of this thesis is presented in figure 4.

Figure 4: Theoretical Framework

Financial Development

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2.4.1 Hypotheses Development

Total Market Capitalization of Football Clubs

As explained in the literature review, financial development reduces the cost of external capital and increases the opportunities for firms to obtain external capital from financial markets and

institutions. Therefore, similar to firms from other industries, it could be expected that financial development increases the total market capitalization of a countries football industry.

Based on several important differences between the football industry and other industries, it can also be argued that financial development may not have or even may have a negative influence on the size of the football market. As explained in the literature review, the football industry is

characterized by favouring utility over profits and a culture of overinvestment. These characteristics cause a lax financial policy and bad governance of football clubs in terms of shareholder profits. With a soft budget constraint, football clubs continuously overinvest in playing talent, to increase their competitive position to obtain sportive success. However, it is likely that clubs that go public don’t experience this soft budget constraint, because public companies are confronted with the discipline of financial markets. The high number of football clubs delisting from the stock exchange in the U.K. could be a sign that football clubs don’t benefit from the emotions of investors but that the football stock market works very rational and measures the true value of the stock. Instead of football clubs taking advantage of investor sentiment, their weak governance is disciplined in stock markets, once they are publicly traded (Aglietta et al, 2010). The discipline of financial markets makes it more difficult or impossible for clubs to continuously spend more on players and salaries than its revenue. This is in line with the argument of Russel (1997), who states that investment decisions of football clubs may be changed when football clubs are going public. However, Aglietta et al. (2010) find that the financial discipline of football clubs is not improved when they go public and this weak governance is disciplined in financial markets.

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will obtain from this financial markets and institutions. Therefore, I argue that financial development has a significant negative influence on the total market capitalization of football clubs within a country.

First, it is argued that similar to other industries, financial development significantly increases the total market capitalization of the football industry within the same country. However, it also is argued that because of the differences between the football industry and regular business, more financial development would have a significant negative influence on the size of a countries’ football market, in contrast to other industries and stock markets in general. Because there are arguments for both a significant positive and significant negative relation, the hypothesis is stated as follows:

Hypothesis 1: Financial development has a significant influence on the market capitalization of football clubs within a country

Financial development is based on the development of both stock markets and financial institutions and therefore two sub hypotheses are created. The explanation above about the influence of financial development is mainly based on the influence of stock markets on the development of the football market. This is logical, because the link of overall stock market development with the

development of the football stock markets is more direct than the link between financial institutions and the football stock market. Better developed stock markets reduce the constraints for firms to obtain external capital from stock markets and increase their willingness to buy securities, because it becomes easier and less costly to trade with them (Levine and Zervos, 1996; Love, 2003). Therefore, it can be expected that stock market development has a significant positive influence on the market capitalization of football clubs within a country.

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Because there are both arguments for a significant positive and significant negative influence, the hypothesis is stated as follows:

Hypothesis 1A: Stock market development has a significant influence on the market capitalization of football clubs within a country

There is an extensive body of literature, finding that financial institutions and stock markets have a significant positive relation and are complementary to each other (Demirgüç-Kunt and Levine, 1996; Lee, 2012). Therefore, it is expected that similar to regular business, development of financial institutions is significantly and positively related with the size of the football stock market in a country.

Another plausible argument for a positive relation is derived from the specific characteristics of the football industry and the superior abilities of banks with respect to markets. According to

Holmström and Tirole (1997) banks have unique monitoring abilities. In addition, according to Chakraborty and Ray (2007), financial institutions have an advantage over markets in exercising corporate control. Because the football industry is characterized by weak governance, favouring utility over profits and an overinvestment environment, it seems likely that financial institutions refuse to borrow money to football clubs. Because capital markets do not possess the unique monitoring abilities of banks, it seems plausible that when financial institutions are well developed, football clubs would earlier obtain external finance from capital markets than from financial institutions like banks. Therefore it is expected that more development of financial institutions would have a positive effect on the size of the football market.

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Because there are arguments for both a significant positive influence and a significant negative influence, the second sub hypothesis is stated as follows:

Hypothesis 1B: Development of financial institutions has a significant influence on the market capitalization of football clubs within a country

Stronger shareholder protection raises the willingness of investors to buy securities, because they are protected against expropriation of the management of firms and other informed traders (La Porta, 1997; Brockman and Chung, 2003). There is an extensive body of literature showing that

countries with good investor protection have significantly larger debt and equity markets (La Porta et al., 1997, 1998, 2000). Therefore, it is expected that countries which provide good protection to

shareholders, also have significant larger football markets.

However, several important differences between the football industry other industries may lead to an insignificant effect or even an opposite outcome. For example, profit-oriented investors want to be protected against expropriation of management, because this would decrease their own profits. However, there is reason to believe that investors in football stocks are less-profit oriented than other investors. The share price of football stocks are significantly influenced by investor sentiment, which indicates that investors are emotionally connected to the clubs. It seems likely that shareholder

protection is not equally important for the football industry as for other industries, because investors in football stocks are emotionally linked to clubs, and an important reason to invest is to support and ‘to be part’ of the club.

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governance. Football clubs only disclose a small part of the available information to their shareholders. The willingness of to disclose information to shareholders is significantly lower firms from the football industry than firms from other industries. It can be argued that when shareholder protection is high and more information is disclosed to shareholders, the bad governance of football clubs and decisions of its management favouring utility over profit are sanctioned by investors in the market. Furthermore, according to Wurgler (2000), more shareholder protection decreases overinvestment within firms. Because football clubs operate in an overinvestment culture it seems likely that the more rights

shareholder receive, the less willing football clubs are to go public, because it reduces their possibility to maximize utility. Therefore, the alternative view tells us that more shareholder protection leads to lower market capitalization of football clubs.

Similar to the previous hypothesis there are arguments for a significant positive and negative influence. The hypothesis is stated as follows:

Hypothesis 2: Shareholder protection has a significant influence on the market

c

apitalization of football clubs within a country

Liquidity of football stocks

According to Demirgüç-Kunt and Levine (1996) the term liquidity generally refers to the ability of investors to trade securities. Developed stock markets are characterized by high liquidity of shares in the market. Moreover, Levine and Zervos (1998) state that liquidity is the most important characteristic of stock markets, because it leads to economic growth. However, Duque and Ferreira (2005) find that liquidity of football stocks in the Portuguese football market is very low comparing to stocks of other commercial organizations. They find that the most liquid firm on the Lisbon Stock Exchange trades more in a day than nation top football clubs Sporting Portugal and Porto trade in a month.

For other industries, there is extensive empirical evidence that financial development, at the forms of stock market development and development of financial institutions has a strong positive relation with stock market liquidity (Demirgüç-Kunt and Levine, 1996). Therefore, it is expected that these financial development indicators, have a significant positive influence on the liquidity of football stocks, similar to the stocks of “ordinary” companies.

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decrease the development of the public football market. In developed financial systems it is easy to trade securities and capital is better allocated to profitable projects. Profit-oriented investors will invest their capital in other industries which reduces the number of participants and the activity in the football stock market. Therefore, it could be argued that more financial development, at the forms of stock market development and development of financial institutions has a significant negative influence on the liquidity of football stocks.

The hypotheses are stated as follows:

Hypothesis 3: Financial development has a significant influence on the liquidity of stocks of football clubs

3A: Stock market development has a significant influence on the liquidity of stocks of football clubs

3B: Development of financial institutions has a significant influence on the liquidity of stocks of football clubs

La Porta et al. (1997, 1998) find that more shareholder protection increases the size of capital markets and Demirgüç-Kunt and Levine (1996) show that the size of capital market is positively related with liquidity in the market. It thus could be expected that more shareholder protection leads to more liquid markets. Moreover, on firm level, Brockman and Chung (2003) find that stronger shareholder protection has a significant and positive influence on stock liquidity. Stronger shareholder protection ensures less information asymmetry and thus the possibility that one trader has more information than another is reduced. This causes a lower cost of liquidity and therefore stock liquidity is improved. In line with these findings for firms from other industries, it is expected that stronger shareholder protection leads to more liquidity of football stocks.

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According to Aglietta et al. (2010) investors in football stocks trade upon their own view on developments in the football market. They state this is caused by the stock price depending on

uncertain factors like sporting results. However, it can also be argued that investors are forced to trade upon their own views on developments in the football market, because football clubs provide them with very little information. When more information about the fundamental is provided to shareholders, this will reduce the volatility and liquidity of football stocks, since investors have a more solid basis to trade upon.

Because arguments are provided for both a positive and negative impact of shareholder protection on the liquidity of football stocks, the hypothesis is formulated as follows:

Hypothesis 4: Shareholder protection has a significant influence on the liquidity of stocks of football clubs

3. Methodology and Data

3.1 Regression model

This section is divided into two steps. The first step includes the regression model used for testing H1, H1a, H1b and H2. These hypotheses test the influence of financial development, its components stock market development and development of financial institutions, and shareholder protection on the total market capitalization of football clubs on the country level. The second step includes the regression model used to test H3, H3a, H3b and H4. These hypotheses test the influence of financial development, stock market development, development of financial institutions and shareholder protection on the liquidity of football stocks. H3, H3a, H3b and H4 are tested on the firm-level.

Step 1. Total market capitalization of football clubs on the country level

The empirical model to test the influence of financial development, its components stock market development, development of financial institutions and shareholder protection on the total market capitalization of football clubs is stated below:

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Where MCAPFCit is the total market capitalization of football clubs scaled by GDP in country i at time t, α

is the global intercept term, FDit is the financial development indicator and SHPit is the indicator of

shareholder protection. ΔGDPPCit is the indicator of a countries’ change in GDP per capita in year t

comparing to the countries’ GDP per capita in year t-1. SAVit and INFLit are the indicators of the control

variables for saving rate and inflation. Dhostit is a dummy variable for hosting the world cup that takes

the value of 1 if country i hosted the World Cup Football and 0 otherwise. uit is the error component which explains differences between actual and estimated values. To determine the impact of both components of financial development, stock market development (SM) and development of financial institutions (FI), FD is replaced by SM and FI in the regression model.

To create an indicator for total market capitalization of football clubs I use an approach which is consistent with previous studies for stock markets in general. Total market capitalization takes the value of all domestic listed shares on domestic exchanges divided by the countries’ GDP (Levine, 2002). However, because this study focuses on the specific football industry, I take the sum of the market capitalization of the individual football clubs from the same country and divide this by its GDP. Similar to other authors (Amihud, 2002) I use the market capitalization of firms at the end of the year.

Stock market development is measured according to a similar approach as in previous studies (Demirgüç-Kunt and Levine, 1996; Love, 2003). Because each indicator of stock market development has several shortcomings and no single indicator fully captures the concept, an index is created to measure overall stock market development more accurate (Demirgüç-Kunt and Levine, 1996). Data is obtained for market capitalization/GDP, total value traded/GDP, and turnover. The stock market development index is calculated by taking the sum of the means-removed values of the stock market development indicators. Development of financial institutions is measured using the same method. Similar to stock market development, no single measure is a complete of the development of financial institutions (Demirgüç-Kunt and Levine, 1996). To measure the overall development of financial institutions, an index is created, consisting of two indicators; the ratio of liquid liabilities to GDP, and ratio of domestic credit to private sector to GDP. According to Demirgüç-Kunt and Levine (1996), both are standard indicators for development of financial institution used in the finance literature. Similar to Love (2003) the measure of total financial development is the sum of the index for stock market development and the index for the development of financial institutions.

For shareholder protection I use the revised La Porta Anti-Director Rights Index of Djankov et al. (2006). To my knowledge, the revised anti-director index is the most recently updated database

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based on the regulations for publicly listed firms in May 2003. The index is based on 6 different indicators: “(1) vote by mail; (2) obstacles to the actual exercise of the right to vote; (3) minority

representation on the Board of Directors through cumulative voting or proportional representation; (4) an oppressed minority mechanism to seek redress in case of expropriation; (5) pre-emptive rights to subscribe to new securities issued by the company; and (6) right to call a special shareholder meeting.”

(Djankov et al., 2006, p. 30)

In the empirical model several control variables are added. Below I shortly define the variables and argument why it is important to control for these variables.

There is an extensive body of literature, providing evidence that growth of GDP per capita and the market capitalization of stock markets are strong and positively related with each other (Levine and Zervos, 1998; Garcia, 1999; Love, 2003), making the growth in GDP per capita an important factor to control for. As in previous studies, I take the change in real GDP per Capita as measure for economic growth.

An important control variable for the influence on total market capitalization of football clubs on country level is inflation, as it is a proxy for macroeconomic stability. Both Garcia (1999) and Yartey (2008) add this variable to their basic regressions, controlling the impact of inflation to determine the influence of other explanatory variables on total market capitalization. Similar to Garcia (1999), data for inflation is derived from the consumer price index.

Garcia (1999) finds that the saving rate of a country is one of the most important determinants of total market capitalization within a country. Also Levine and Zervos (1998) find that high saving rates are strong and positively related with total market capitalization. To measure the relation between the total market capitalization of football clubs on country level and the major independent variables, it is important to control for this effect. Similar to Garcia (1999) saving rates are GDP-weighted, which means that gross national savings are divided by GDP.

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Therefore the culture towards football is an important factor the control for. Of course, there are exceptions like for example Spain, which has a population which is devoted to football and where football clubs like Barcelona and Real Madrid are national institutions. However, overall, it could be believed that the public football market in football-devoted countries is bigger than in countries with low devotion to football. Similar to Leeds and Leeds (2009), I take hosting the World cup as a proxy for the culture towards football. It represents a country’s devotion to football and reflects the maturity of soccer institutions (Leeds and Leeds, 2009). The maturity of soccer institutions which might affect the pressure of these institutions on football clubs to increase their financial discipline. Hosting the World Cup is measured by a dummy variable, which takes the value of 1 when the country has organized the World Cup Football and 0 otherwise.

As will be explained in the sample section, only a small fraction of the total number of countries includes a listed football club. Many countries of our data sample do have a value of zero on the total market capitalization of football clubs, which is the dependent variable in the regression model. Therefore, a tobit analysis is applied in this study and values of 0 on total market capitalization of

football clubs are censored. To remove time effects on the dependent variable, year dummies are added to the empirical model. By including year dummies standard errors are clustered at the country level.

Step 2. Liquidity of football stocks on the firm level

In this second step the influence of financial development, its components stock market development and development of financial institutions, and shareholder protection on the liquidity of football stocks is examined. The model to test the influence of the independent variables on the liquidity of stocks is stated as follows:

ILLIQit = α + β1 FDit + β2 SHPit + β3 SIZEit+ β4 LEVit + β5 VOLit + uit

Where ILLIQit is the illiquidity indicator of firm i at time t, α is the intercept term, FD is the financial development indicator and SHP is the indicator of shareholder protection. SIZE is the indicator of total firm size, LEV is the leverage indicator and VOLit is the indicator of the volatility of the stock of firm i in

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I use the Amihud illiquidity indicator to measure the liquidity of football stocks. The Amihud Illiquidity indicator equals “the ratio of a stock absolute daily return to its daily dollar volume, averaged

over some period. This measure is interpreted as the daily stock price reaction to a dollar of trading volume” (Amihud, 2002, p. 52). Of course, although this description is focussed on stocks denoted in

dollars, this measure is applicable for all currencies. According to Amihud (2002), microstructure data provides more accurate measures for liquidity. However, because this microstructure data on quotes and transactions is not available for the major part of the publicly listed football clubs, the Amihud Illiquidity indicator is used. This measure makes use of volumes traded and stock returns, and this data could be easily obtained from Thomson’s DataStream. It’s important to notice that the Amihud illiquidity indicator measures illiquidity, and takes high values for illiquid and low values for liquid stocks.

I control for firm size, SIZE, because findings in literature state that the stocks of small

companies are less liquid than stocks of bigger firms (Amihud, 2002; Chelley-Steeley and Steeley, 2008; Chordia et al., 2000). Also, increasing volatility, VOL, has an important and positive influence on stock liquidity (Chordia et al., 2000; Hameed et al., 2010). Last control variable is financial leverage, LEV, which is also positively related with stock liquidity (Cheung and Ng, 1992). To measure the testable hypothesis, size, volatility and leverage are important variables to control for, since for firms from other industries they all have an impact on stock liquidity. As in previous studies, firm size is defined as the natural log of total assets (in thousands of Euro’s), leverage as the ratio of total debt to total assets (Chung et al., 2002). The common used measure for stock volatility is the standard deviation of the stock daily return on the stock within a year (Amihud, 2002).

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3.2 Sample selection and descriptive statistics

The data sample of this study consists of 53 countries. These countries are selected by the data-availability for the indicators of financial development. To calculate the total market capitalization of football clubs, firm-level data is obtained. However, due to data limitations the data-sample does not include all football clubs listed on a stock exchange, within the time period 2000-2008. Listed football clubs which are left out of the sample because of non-availability of data are: Manchester City, Bolton Wanderers, Bradford City, Swansea City, AGF Kontraktfodbold, Akademisk Boldklub, Grasshoppers Zurich and Ruch Chorzow. This results in a total of 42 publicly listed football clubs from ten different countries. A list of all publicly listed football clubs included, including the year of their IPO and possible delisting is presented in the appendix.

The period 2000-2008 is chosen because of data-availability. Moreover, it includes the largest number of countries including a listed football. In addition, it includes the wave of football clubs from the UK delisting from the stock exchange and IPO’s from clubs outside the U.K. Table I presents the number of publicly listed football clubs in specific years. Also the number of countries which include a listed football clubs is presented. The table displays that in contrast to the number of publicly listed football clubs, which stays relatively stable, the number of countries including a listed football club doubles from the end of 1999 to the end of 2008.

Table I: Number of IPOs and clubs delisting

Time-Period

Nr. of listed clubs at the beginning of the

period

Nr. of IPOs Nr. of clubs delisting

Nr. of listed clubs at the end of the

period

Nr. of countries including a listed football club at the end of

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Descriptive statistics of the sample are presented in table II. Information for all included countries is provided. In the first row, with the descriptive statistics for the total market capitalization of football clubs, both censored and uncensored values are included. The descriptive statistics of total market capitalization of football clubs where censored values are excluded are presented in the second row, which is grey, in table II.

Step 2. Liquidity of football stocks on the firm-level

The data sample in step 2 is smaller than in step 1 because only specific country-year observations are included when at least one publicly listed football club is present. This reduces the total number of countries included in this step. Since the principle focus of analysis is at the firm level, firm-level data is gathered. In total, 40 football clubs from ten countries are included in this step. When less than 50 data-points are available to calculate the Amihud Illiquidity indicator of a club in a specific year, this specific firm-year observation is excluded from the sample. Because the Amihud Illiquidity indicator is calculated from stock returns and trading volume, this means that when there are less than 50 data-points for one of these variables, the specific year observation is excluded. The data-sample consists of 253 firm-level observations for liquidity from 40 different football clubs. Data for the control variables size, leverage and volatility is limited by data-availability, which results in an unequal number of observations for these control variables. Descriptive statistics of the sample included in step 2, are presented in table III.

Table II: Descriptive statistics step 1

MCAPFC equals the total market capitalization of football clubs within a country divided by gross domestic product (GDP). SM is the stock market development index that equals the sum of (standardized indices of) market capitalization divided by GDP, total value traded divided by GDP and turnover. FI is the index of development of financial institutions and equals the (standardized indices of) the ratio of liquid liabilities to GDP and the credit allocated to the private sector divided by GDP. FD is the sum of SM and FI. SHP is the measure for shareholder protection from Djankov et al. (2006). ΔGDPPC is the annual change in GDP per capita between t and t-1. SAV is the measure of saving rate, INFL is the

measure of the inflation rate. HOST indicates a countries’ football culture and is measured by a dummy variable which takes the value of 1 when a country has organized the World Cup football and 0 otherwise.

Obs. Mean Median Max Min St.Dev Skewness Kurtosis

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3.3 Multicollinearity

As explained, financial development will be highly correlated with stock market development and development of financial institutions, because it is the sum of these values. When independent variables are highly correlated with each other they face the problem of multicollinearity, included in the same regression. Table IV presents the correlations of between the variables used in the first step.

Table III: Descriptive statistics step 2

ILLIQ is the Amihud illiquidity indicator and equals the absolute daily stock returns divided by its price volume, averaged over a year. SM is the stock market development index that equals the sum of (standardized indices of) market capitalization divided by GDP, total value traded divided by GDP and turnover. FI is the index of development of financial institutions and equals the (standardized indices of) the ratio of liquid liabilities to GDP and the credit allocated to the private sector divided by GDP. FD is the sum of SM and FI. SHP is the measure for shareholder protection from Djankov et al. (2006). SIZE is the natural logarithm of total assets (in thousands of Euro’s). LEV is the leverage indicator which

equals total debt divided by total assets. VOL is the standard deviation of daily stocks returns on the stock within a year.

Obs. Mean Median Max Min St.Dev Skewness Kurtosis

ILLIQ 253 0.0011 9.18E-05 0.0308 2.63E-07 0.0032 6.5572 56.8540

FD 253 2.1693 2.4097 7.6538 -0.9599 2.0481 0.6649 3.3844 SM 253 1.3866 1.3549 5.9103 -1.1275 1.5495 0.9797 4.0477 FI 253 0.7826 0.9495 2.0235 -0.9416 0.6959 -0.8586 3.4033 SHP 253 3.9842 4.0 5.0 2.0 1.1099 -0.5490 1.7779 SIZE 225 11.2814 11.4266 13.9782 7.0892 1.1843 -0.6659 3.7914 LEV 224 0.2586 0.2340 1.1297 0.00000 0.2259 1.0847 4.4872 VOL 252 0.0278 0.0246 0.1532 0.0051 0.0165 2.8902 18.5642

Table IV: correlation matrix variables step 1

This table presents the correlation coefficients between the dependent variable (Dep) and the independent (Indep) and control variables. MCAPFC equals the total market capitalization of football clubs within country i at the end of year t divided by gross domestic product (GDP). SM is the stock market development index that equals the sum of (standardized indices of) market capitalization divided by GDP, total value traded divided by GDP and turnover. FI is the index of development of financial institutions and equals the (standardized indices of) the ratio of liquid liabilities to GDP and the credit allocated to the private sector divided by GDP. FD is the sum of SM and FI. SHP is the measure for shareholder protection from Djankov et al. (2006). ΔGDPPC is the annual change in GDP per capita between t and t-1.

SAV is the measure of saving rate, INFL is the measure of the inflation rate. HOST indicates a countries’ football culture and is measured by a dummy variable which takes the value of 1 when a country has organized the World Cup football and 0 otherwise.

Type.Var MCAP.FC FD SM FI SHP ΔGDPPC SAV INFL HOST

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It can be concluded that overall financial development, stock market development and development of financial institutions are highly correlated with each other. The highest correlation is 0.961 between SM and FD. Other critical values are 0.800 between FD and FI, 0.604 between FI and SM, 0.642.

Similar to Mensah (1983), this study uses a cut-off point of 0.5. To avoid problems with

multicollinearity, variables which have a mutual correlation coefficient higher than 0.5 are not included in the same regression. This means that FD, SM and FI will not be included in the same regression, to avoid problems with multicollinearity. However, shareholder protection and the control variables don’t show critical correlation coefficients. These variables can be included in the same regression.

Step 2. Liquidity of football stocks on the firm-level

Table V shows the correlation coefficients of the second step. FD, SM, FI and FS, do have slightly different correlations with each other, because the number of countries included is reduced to ten. In contrast to the first step, when all countries are included, shareholder protection is highly correlated with the other independent variables. Similar to step 1, a cut-off point of 0.5 is used. Except for the correlation coefficient between and SHP and SM, all correlation coefficients between the independent variables are above the critical value of 0.5. The financial development indicators and the indicator for shareholder protection are highly correlated with each other and therefore they will not be included in the same regression. The control variables size, leverage and volatility don’t have a critical correlation coefficient with any of the other control and independent variables and thus can be added to the basic regressions.

Table V: correlation matrix variables step 2

This table presents the correlation coefficients between the dependent variable (Dep) and the independent (Indep) and control variables.ILLIQ is the Amihud illiquidity indicator and equals the absolute daily stock returns divided by its price volume, averaged over a year. SM is the stock market development index that

equals the sum of (standardized indices of) market capitalization divided by GDP, total value traded divided by GDP and turnover. FI is the index of development of financial institutions and equals the (standardized indices of) the ratio of liquid liabilities to GDP and the credit allocated to the private sector divided by GDP. FD is the sum of SM and FI. SHP is the measure for shareholder protection from Djankov et al. (2006). SIZE is the natural logarithm of total

assets (in thousands of Euro’s). LEV is the leverage indicator which equals total debt divided by total assets. VOL is the standard deviation of daily stocks returns on the stock within a year.

Type.Var ILLIQ FD SM FI SHP SIZE LEV VOL

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4. Empirical Results

Total Market Capitalization on the Country Level

Table III reports the regression results for the influence of financial development, stock market development, development of financial institutions, shareholder protection and the control variables on the total market capitalization of football clubs. Because financial development, stock market

development and development of financial institutions are highly correlated with each other, these variables are not included in the same regression. First, the influence of the explanatory variables on the total market capitalization of football clubs is measured including only one explanatory variable in the regression. The results of these “single regressions” are presented in regression 1 to 8 in table III. Regressions 10 to 13 present the results when shareholder protection and the control variables are added to the single regressions 1 to 3 (the single regressions of FD, SM and FI, respectively). As

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Table VI: Tobit Analyses Regression Results

(Dependent Variable : Total Market Capitalization of Football Clubs)

The regression model is: MCAPFCit = α + β1 FDit + β2 SHPit + β3 ΔGDPPCit + β4 SAVit + β5 INFLit + β6 Dhostit + uit. MCAPFCit equals the total market capitalization of football

clubs within country i at the end of year t divided by gross domestic product (GDP). SM is the stock market development index that equals the sum of (standardized indices of) market capitalization divided by GDP, total value traded divided by GDP and turnover. FI is the index of development of financial institutions and equals the (standardized indices of) the ratio of liquid liabilities to GDP and the credit allocated to the private sector divided by GDP. FD is the sum of SM and FI. SHP is the measure for shareholder protection from Djankov et al. (2006). ΔGDPPC is the annual change in GDP per capita between t and t-1. SAV is the measure of saving rate, INFL is the measure of the inflation rate. HOST indicates a countries’ football culture and is measured by a dummy variable which takes the value of 1 when a country has organized the World Cup football and 0 otherwise. The z-statistics are shown in parentheses. Coefficients denoted with ***are significant at the 1% level, coefficients denoted with ** at a 5% level and coefficients denoted with * at a 10 % level, in a two tailed test.

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) FD 0.00018*** (4.605) 0.00025*** (5.156) SM 0.00018*** (3.855) 0.00032*** (4.995) FI 0.00058*** (5.101) 0.00060*** (4.534) SHP -0.00018* (-2.190) -0.00016 (-1.756) -0.00012 (1.333) -0.00021* (-2.158) ΔGDPPC -0.00196* _(-2.047) 0.00037 _(0.292) -0.00034 _(-0.287) 0.00082 _(0.613) SAV -0.00230* (-2.033) -0.00247 (-1.778) -0.00213 (-1.549) -0.00251 (-1.773) INFL -0.00117** (-2.288) -0.00234** (-2.461) -0.00273** (-2.572) -0.00170 (-1.909) HOST 0.00052*** (2.930) -2.43E-05 (-0.127) -0.00011 (-0.554) 0.00037* (1.980)

Year dummies included included included included included included included included included included included

Log Likelyhood 253.899 248.626 258.177 247.917 242.009 241.975 256.398 244.686 288.634 286.402 284.007

Uncensored / Total number of

observation

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H1 predicts that financial development has a significant influence on the total market

capitalization of football clubs within a country. The regression coefficient is positive and significant at the 0.01 confidence level in both regression 1 and 9. The results support H1 and find a positive relation. This is in line with the findings for stock markets in general, where more financial development increases the access of firms to external finance and increases the total size of equity markets. Football clubs operate in an overinvestment environment and in order to obtain sportive success, there are many investment opportunities in terms of new players. The results indicate that financial development reduces the constraints for football clubs to obtain external finance from stock markets, in order to finance their major investments. The alternative perspective expected a significant negative influence of financial development on the total market capitalization of football clubs. In contrast to other

commercial organizations, football clubs favour utility over profits and their weak governance in terms of shareholder profits was expected to be sanctioned in the market. Therefore, it was expected that in more developed financial systems, where profitable investments are identified and more capital is allocated to these profitable projects, the size of the public football market would decrease. However, this alternative view is not supported by the results. In contrast, despite the differences between the football industry and other industries, financial development significantly increases the size of a countries’ football stock market.

Also H1A is supported by the results. The regression coefficient of stock market development is positive and significant at the 0.01 confidence level in regression 2. When shareholder protection and the control variables are added in regression 10, the influence of stock market development on the total market capitalization of football clubs is still positive and significant at the 0.01 significance level. The alternative perspective states that more stock market development significantly decreases the total market capitalization of football clubs. In contrast to the findings of Jensen and Murphy (1990) for other commercial organizations, Aglietta et al. (2010) find that the governance of football clubs is not

improved after going public. In more developed stock markets, more and better information about firms is diffused to shareholders and it becomes easier for investors to trade upon this information. Therefore, it was expected that the weak governance of publicly listed football clubs is disciplined more in

Development of the Football Stock Market The Impact of Financial Development and Shareholder Protection