The Impact of Economic Factors on Performance of European Football Clubs

Abstract

Leicester City has just recently won the English Premier League trophy after spending next to no money the season previous. Plenty of clubs spent outrageous amounts of money to acquire the best players from around the world and still fall short of the final prize. Does spending in the Premier League matter anymore? This research paper looks to study the effects that economic factors have on performance. It uses multiple linear regression analysis to determine if there are correlations between revenue, wages, and transfer activity on the final league position of English Premier League clubs and by how much. In summary, revenue had the largest effect and shockingly net expenditure had a negative correlation on performance. The paper continues with an in depth analysis on the transfer market over a longer period of time to see if there is a difference between the effects that net spending and total spending have on league position using separate linear regressions. The difference between the two and their effects on performance is significant. Expenditure is 5 times more impactful on league position than net expenditure. Past research has shown the importance of lagged spending on league position, so the paper finishes with similar conclusions that there is significance in when a club spends money in the transfer market and when they achieve the rewards of said spending.