An Econometric Study into the Efficacy of Interventions by the English Football Authorities for the Promotion of Financial Sustainability and the Impact on Competitive Balance in the English Football League (EFL) Championship

Abstract

This thesis, which contains original regression analysis using a unique and original set of variables, in addition to the unitary indicators for receiving a parachute payment, the P&S Rules, and the COVID-affected seasons, makes three significant contributions. We believe it to be the first study into the interaction between English Premier League (EPL) parachute payments, the Profitability and Sustainability (P&S) rules, and the COVID-19 restrictions on the financial health, competitive balance at a season level, and uncertainty of outcome at match level for the English Football League (EFL) Championship. Using Altman’s z-score, the first contribution shows that P&S has not made Championship clubs healthier, nor has COVID-19 made the clubs more financially distressed. Although parachute clubs are less financially distressed than non-parachute clubs, this is due to an advantage in Total Assets, which disappears when we group similar clubs. Our second contribution shows that the parachute payments have created a competitive imbalance in the Championship by giving the clubs receiving parachute payments a 16-point head start. However, contrary to established research, these payments provide this advantage only during the COVID-affected seasons. This is the first time club debt and club losses, among other things, have been controlled for in a competitive balance study of the Championship. Our third contribution shows that games between a parachute and a non-parachute club were no more predictable in the pre-and post-P&S period nor the COVID-affected seasons. Instead, manager changes, player turnover, and differences in player spending have a greater impact on unpredictability. This thesis helps practitioners, regulators, and football club owners improve their policy-making decisions for the EFL Championship. Future P&S regulations could consider a 'Pick and Mix' range of sustainability measures, and regulators should be mindful that competitive balance measures may harm attendance. This research is especially timely given that an Independent Football Regulator is proposed.