Gambling to achieve success in professional sport: The case of the EFL Championship - a bubble waiting to burst?

Evans, Richard and Walters, Geoff and Hamil, Sean (2021) Gambling to achieve success in professional sport: The case of the EFL Championship - a bubble waiting to burst? Working Paper. Birkbeck Sport Business Centre, London, UK.

Abstract

This article quantifies the extent of clubs in the Championship of the English Football League (EFL) adopting the conventionally economically irrational decision to run a loss-making budget in the hope of achieving sporting success. It finds that this strategy was both prevalent and the most successful to achieve promotion. The research makes three contributions to the sports literature. The first is the quantification of the prevalence of this form of gambling. The second is the finding that, despite regulations to limit spending on wages, this gambling is rational in the non-economic sense because it is almost a necessary strategy to achieve promotion if the club had not been relegated from the Premier League in the previous season. The third extends debate suggesting that financial regulation in professional sports leagues can be viewed through the lens of internal legitimacy, whereby regulations are implemented in such a way as to be accepted by member clubs and have minimal impact on behaviour. It also suggests that regulation which directly targets the liquidity of football clubs with a minimum threshold limit might be more effective in ensuring their financial sustainability than the profit or wage restraints that have been applied hitherto as ultimately, as with other financial ‘bubbles’, it is a lack of cash that makes the financial position of a business unsustainable.

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