fourth edition, June 2010 - Asset | Econometrics

h o i S g o i N g t o B E r E L E g A t E d
A N d W h Y ?
f O O T B a L L S P e C I a L
in a recent working paper co-authored with Jean-Baptiste dherbecourt 1 , the question of the determinants
of promotion and relegation in European professional football leagues was investigated. this report
discusses several issues concerning promotion and relegation in European football leagues, and it gives an
overview of the most important results of our research.
Name:
Bastien Drut
Position:
PhD candidate
university:
Center Emile Bernheim
(Université Libre de
Bruxelles) &
EconomiX-CNRS
(Université Paris Ouest
Nanterre La Défense)
actually, the organisation of european sports
leagues broadly differs from the organisation
of leagues in North america. In North america,
the clubs participating in the leagues (e.g. NBa,
NHL, NfL) remain the same year after year. On
the contrary, in europe, the best clubs at the
end of the season are promoted to the superior
division and the worst clubs are relegated to
the inferior division. This type of hierarchical
structure has been applied in european football
since the creation of the english league in 1888.
a very lively debate, however, regularly takes
place on the opportunity to adopt the american
model. for instance, the biggest european clubs
frequently evoke the possibility to play in closed
leagues, both national and international.
The consequence of the opened structure is that
clubs have stronger incentives to compete in
order to stay in the elite. Indeed, in addition of the
fans’ disappointment, the relegation often leads
to human and financial drama. as the club will
receive less money from television broadcasting
rights, sponsoring, and matchday revenues 2 , it
has to sell players with high salaries or fire some
staff members (coach, assistants, etcetera). In a
certain way, the relegated club is downsized.
On the opposite, after promotion, a club can
adopt a positive development strategy: hiring
new players, construction of a new stadium
(which is a very heavy investment), etcetera. The
difference in incentives between opened and
closed leagues was studied in detail by several
authors (Noll, 2002; Szymanski and Valetti,
2005). Noll (2002) argues that the promotionrelegation
system tends to improve the general
quality of the squads in the top division as clubs
have an incentive to improve the quality of the
team in this system in order to stay in the elite.
Szymanski and Valetti (2005) show that the fear
of relegation diminishes the incentives to share
revenues 3 and increases inequalities among
teams. If the consequences of promotion and
relegation have been extensively studied in
the literature of sports economics, then these
determinants are not to our knowledge.
actually, top division clubs have to invest (e.g.
by hiring good players or by training young
players) to secure their position and to stay
better armed than the other clubs. In order
to understand this, one has to consider that
sportive performances during a season are far
from random and highly depending on wage
expenditures. The example of arsenal is rather
convincing: the club has never been relegated
to the second english division since World War II.
If the sportive ranking at the end of the season
would have been random, the probability on
not to be relegated 4 during 65 years would have
been , i.e. lower than 0.003%. another clue
is given by the work of Hoehn and Szymanski
(1999). By studying the english leagues during
the period 1978-1996, they show that the
ranking at the end of the season is highly
correlated with the average wage expenditure
relative to the mean of the clubs 5 . In other
words, if you are more able to pay your players
more than other clubs, you will be better ranked.
Of course, this does not exclude chance from a
given match (even Manchester United may lose
against a poor squad one day). In the long run,
however, wage expenditures roughly explain
the sportive results.
This being said, are wages enough to explain
promotion and relegation? We do not believe
that it is reasonable to stop the analysis at
this stage, because additional factors could
impact the team’s success such as hiring a new
coach (the adaptation to a new strategy may
imply additional costs), injuries, the collective
inexperience of the squad, the possible
mispricing of wages, etcetera. Moreover, in order
to clearly understand the football industry, one
also has to explain why some clubs have more
spending power than others. Our research
focuses on these two questions.
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as the variable we want to explain (i.e.
promotion or relegation) is binary, we
use a logistic model. The explanatory
variables contain the wage expenditures
and some additional variables: average
age of the players, percentage of
foreign players, dummy whether there
is a new manager. We concentrated
our study on the english and french
clubs as data on wages in other big
european Championships were not
available. for the moment, our results
are still very preliminary. Of course, wage
expenditures have a strong explanatory
power, and obviously increase promotion
probability and decrease relegation
probability. We also found that hiring
a new coach increases the relegation
probability significantly whereas it has
no significant impact on the promotion
probability. another finding is that
clubs with older players have a higher
probability to go down in the Premier
League, but not in the french league.
a possible explanation is that very rich
clubs have the possibility to detect and
hire very young and talented players
from all over the world. This has to be
complemented with other variables
though, in particular with governance
indicators.
In table 1, we expose the promotion
and relegation probabilities for the
Ligue 1 and the Ligue 2 (the first and
second divisions of the french football
league respectively) for the season
2008-2009. The model yields rather
good results as the clubs with a high
relegation probability (a high promotion
probability) are badly ranked (well
ranked). The most striking result is that
clubs are far from equal: 11 teams had
a relegation probability smaller than or
equal to 0.10 in Ligue 1. When the model
fails, i.e. when it does not correctly predict
promotion or relegation for a given
season, it is very likely that this mistake
will be corrected during the next season.
for instance, even though the two teams
with the highest relegation probability
were not relegated during the season
2008-2009, they were indeed relegated
the next season. as far as the promotion
is concerned, the two teams with the
highest promotion probability (Lens and
Montpellier) were promoted. The third
promoted club, Boulogne-sur-Mer, had a
Ligue 1 Ligue 2
Final
Final
Club Relegation Probability Ranking Club Promotion Probability Ranking
Grenoble 0.52 13 Lens 1.00 1
Le Mans 0.43 16 Montpellier 0.73 2
Nancy 0.29 15 Troyes 0.41 19
Le Havre 0.29 20 Reims 0.28 20
Valenciennes 0.28 12 Sedan 0.18 9
St. Etienne 0.26 17 Guingamp 0.16 13
Nice 0.18 9 Amiens 0.15 18
Nantes 0.17 19 Chateauroux 0.13 15
Caen 0.12 18 Metz 0.13 5
Lorient 0.10 10 Nimes 0.10 17
Toulouse 0.09 4 Boulogne 0.09 3
Auxerre 0.08 8 Angers 0.09 7
Lille 0.07 5 Ajaccio 0.09 16
Sochaux 0.06 14 Strasbourg 0.08 4
Monaco 0.04 11 Bastia 0.08 11
Rennes 0.03 7 Dijon 0.08 8
PSG 0.00 6 Brest 0.07 14
Bordeaux 0.00 1 Clermont 0.06 12
Marseille 0.00 2 Vannes 0.05 10
Lyon 0.00 3 Tours 0.04 6
Considering the fact that the best ranked clubs get the highest revenues 6 T a b l e 1
and are in this way more
able to attract talented players the following year, one can understand that a self-reinforcing
phenomenon is occurring. The richest clubs hire relatively better players, are ranked better, earn
more money, and so on. For this reason, freshly promoted clubs are unable to compete with wellestablished
clubs in the first division and do not succeed in settling durably in the elite. In European
very low promotion probability (0.09).
Nonetheless, this club was eventually
relegated to the second division at the
end of the season 2009-2010.
Considering the fact that the best
ranked clubs get the highest revenues 6
and are in this way more able to attract
talented players the following year, one
can understand that a self-reinforcing
phenomenon is occurring. The richest
clubs hire relatively better players, are
ranked better, earn more money, and
so on. for this reason, freshly promoted
clubs are unable to compete with wellestablished
clubs in the first division
and do not succeed in settling durably
in the elite. In european football
championships, there is a hard core of
clubs in the first division with a very low
probability of relegation. Indeed, we may
conclude that european football leagues
are far less opened than one might think. |
1. Dherbecourt J.-B. and B. Drut, Who will go down this
year ? The determinants of promotion and relegation
in european soccer leagues. Working Paper of
Université Libre de Bruxelles, N°09-38.
2. for professional football clubs, the revenues consist
almost exclusively of television broadcasting rights,
matchday revenues, and sponsoring.
3. In most of the major european championships
(england, Germany, france, and Italy soon), the
league negotiates the television broadcasting rights
collectively and subsequently redistributes the
proceeds to the clubs by using its own criteria.
4. Only the three worst-ranked teams at the end of the
season are relegated.
5. The r-square of the OLS regression is 0.92.
6. for instance, television broadcasting rights are
redistributed explicitly in function of sportive results.
references
Hoehn T. and S. Szymanski, 1999, The americanization
of european football. Economic Policy, vol. 28, 205-240.
Noll r., 2002, The economics of Promotion and
relegation in Sports Leagues. Journal of Sports
Economics, vol. 3(2), 169-203.
Szymanski S. and T. Valetti, 2005, Promotion and
relegation in Sporting Contests. Rivista di Politica
Economica, vol. 95(5/6), 3-39.
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