An Analysis of The Determinants of Success in The Premier League: Does Money Guarantee Success?

EC331: Research in Applied Economics
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An analysis of the determinants of success in the Premier League: Does money guarantee success?
Terry Tsz Chun Wong

Student ID: 1001519 Word Count: 5000 (includes footnotes and tables)
Abstract:
This paper aims to identify the extent to which money brings success to a Premier League club. This is achieved by evaluating factors that determine a clubs overall financial position, in comparison with factors relating to team stability at a club. The analysis incorporates ideas drawn from Szymanski and Kuper (2012) and Van Vugt, Hart and Leader (2008), and is carried out on data across four seasons between 2007 and 2011. The data was collected from Deloitte & Touches Annual Review of Football Finance, EUFO Football Squads and World Football Statistics.
Terry Tsz Chun Wong 1001519
Table of Contents Page Section 1: Introduction 1.1 Introduction 1.2 Literature Review and Theory Section 2: Data Summary and Methodology 2.1 Data Summary 2.2 Methodology Section 3: Empirical Analysis 3.1 Empirical Analysis: Financial Position 3.2 Empirical Analysis: Team Stability Section 4: Final Conclusions 4.1 Limitations and Extensions 4.2 Conclusion Section 5: Appendix 5.1 Variable Descriptions 5.2 Mathematical Appendix Section 6: Bibliography 6. Bibliography 22 19 20 17 17 13 14 7 9 3 4
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Section 1: Introduction 1.1 INTRODUCTION To build a great team is not all about money. First you have to create spirit and togetherness in the squad and that is not easy.- Arsne Wenger, 2003. Since the induction of the Premier League in 1992, clubs in the top league of English football have seen their revenues increase dramatically, caused by the increasingly expensive broadcasting rights sold to network companies worldwide by the league association. In fact, between the period 2007 and 2011 alone, the total revenue received solely from broadcasting by Premier League clubs stood at over 3.3 billion1. Furthermore, a handful of Premier League clubs, most notably Manchester City and Chelsea, have experienced an influx of investment by wealthy owners. Seeking healthy returns from their investments, these owners have injected substantial levels of money into the club, in an attempt to build teams that can achieve success in the Premier League. Hence, it is no surprise that money is now perceived to play an extremely important role in achieving success in the Premier League by fans and the media. Yet, despite this, the financial status of a club does not consistently correspond with the overall success of the club within the league. This begs the question: does money really guarantee success in the Premier League? Van Vugt, Hart and Leader (2008) argue that success can instead be achieved by maintaining team stability. He finds that a higher level of team stability improves the coordination between players on the pitch, whilst at the same time creating a sense of motivation and team spirit within the team. This paper incorporates their ideas to compare the true significance of a clubs financial position, in relation to factors that capture the overall stability of a club. The analysis is carried out using data collected on Premier League teams across four seasons between 2007 and 2011. I first begin by outlining the variety of previous research on the use of economics in sport that has provided me with inspiration during the process of constructing my final model. I then carry out a preliminary analysis on my chosen variables, along with a detailed explanation of my final model. Finally, the data is fully analysed, providing results that are interpreted statistically and economically, and subsequently allowing me to make my final conclusions.
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Figure calculated using data from the Premier League Annual Reviews 2007-2011
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1.2 LITERATURE REVIEW AND THEORY Previous literature analysing, not only professional football leagues, but also renowned leagues that exist in other sports, has assisted me in developing the framework for my model. The typical structure that exists in league competitions, in which teams typically participate once a year, allows a teams overall performance to be ultimately represented by the league position obtained at the end of each season. In his analysis on the impact of discrimination on league position in English football, Szymanski (2000) uses a negative log-odds function, in which pit denotes all possible league positions, from 1 to 92, across all four divisions in English football: !!" ! !!" !!" ! !!" ! !!" !
This continuous variable allows for an effective linear regression, and more importantly, gives a higher weight to progress further up the table. This advantage is particularly vital in my analysis of the Premier League, as exponentially large financial incentives lie in positions towards the top end of the table. Such incentives comprise of a greater share of the distributed revenue from the sale of broadcasting rights2, as well as opportunities to participate in European competitions. I have subsequently emulated Szymanskis approach and modified the formula to simply account for the 20 possible positions a team can finish within the Premier League: !!" ! ! !!" !!" ! !!" ! !!" !
The significance of a clubs financial strength in generating success is thoroughly documented within the literature. There is a particular focus on the explosion of media that has revolutionised the landscape across all popular team sports. Vlassopoulos (2009) thoroughly documents the significant role played by television network deals in generating revenue for franchises in the U.S. National Football League (NFL). He identifies that in 2006, the deals struck with popular media network, such as ESPN, provided NFL franchises with almost $117 million each, which for many teams accounted for half of their total revenue. Similarly, Premier League clubs have seen their incomes progressively increase, as the price of broadcasting rights sold to TV companies continues to rise. This substantial boost in revenue thus allows teams to invest in building teams with the best personnel, with the intention to create further success. Previous literature, most notably Szymanski and Kuper (2012), found that the labour market within football is highly efficient. Hence, players with more ability are rightly paid higher wages. It is therefore no surprise that Premier League clubs with higher annual incomes have typically larger wage bills, as they are able to afford the more talented players. This is
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25% of broadcasting rights revenue is awarded on a merit basis, depending on where a club finishes in the final League table (Barclays Premier League)
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subsequently translated into better team performances, as Szymanski and Kuper identify a positive relationship between a clubs wage bill and final league position. On the contrary, the transfer market, in which clubs buy and sell players, has proven to be relatively inefficient. Szymanski and Kuper (2012) identified that the net transfer spending3 explained only 16% of the total variation in league position, signifying a weak relationship between the variable and a teams performance in the league. They explained their findings by arguing that clubs were overestimating the true values of their investments and effectively buying the wrong players that have not improved the teams overall performances. The detailed work of Van Vugt et al. (2008) into the significance of team stability in the Italian first division (Serie A) provides the foundations for my analysis. He measures team stability by calculating the percentage of players, who, at the start of the league season, were also playing for the same team at the beginning of the previous season. Having discovered a positive relationship between the variable and league position, he draws a conclusion that stability increases the teams coordination on the pitch, as players develop an understanding and a shared motivation to succeed. Similarly, Tarlow (2012) argues that in the U.S. National Basketball Association (NBA), teams with greater team chemistry have higher efficiency on the pitch, because a players ability to make good decisions during play is directly dependent upon his knowledge of each of his teammates abilities, limitations, and tendencies. This, consequently, translates into better team performances and greater success in the league. The team chemistry variable used in my analysis compares the top eleven players in each team that have played the most minutes in a certain season with the top eleven in the preceding season. Subsequently, a point is allocated for every player that feature in both groups. This variable works under the assumption that the players with the most minutes on the pitch are likely to have played with each other more frequently, and thus developing a shared knowledge on factors such as their teammates abilities, limitations and tendencies (Tarlow, 2012). Moreover, by making comparisons with the previous season, I attempt to capture the level of team chemistry that is conserved each season. Van Vugt et al. further analyses the potential impacts of the age of players on team stability and subsequently league position, identifying a negative relationship between the average age4 of a playing squad and league position. He argues that because a players ability typically declines with age, older teams are expected to finish lower in the league. In extension, my model includes a variable, ratio of players aged above 29, which computes the percentage of players within the squad that are 30 years old or above. This is the perceived age within the football industry when a players ability starts to diminish. Hence, I intend to find a similar relationship as average age. Managerial stability is finally highlighted by Van Vugt et al. as a significant factor in achieving success, particularly in the long-run. By including a dummy variable to represent a change in manager at a club in his regression, he concludes that teams that had
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Appendix 1.1: Variable descriptions Appendix 1.1: Variable descriptions
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experienced a change in manager during the season were generally ranked lower at the end of the season. I extend my analysis to try and identify differences between a managerial change that occurs before the start of a season, and one that occurs during a season. I believe that a change during a season is more likely to be a result of a struggling club replacing its under-achieving manager, in a bid to stimulate success. Hence, I hypothesise that the impact of such a change to be positive. By contrast, a managerial change that occurs before the start of a season may be a result of a manager deciding to take a new job. This may have a negative impact on the team, possibly because of the players emotional attachment to their previous manager, or because of a lack of understanding with the new manager. Finally, it is likely that a teams success in a previous season can impact on their performance in the following season. Tarlow (2012) found that in the NBA, a teams strong performance during one season would have a positive effect. Hence, in order to capture this aspect, I incorporate a lagged dependent variable into the model.
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Section 2: Data & Methodology In order to carry out my analysis, I have put together my own panel dataset that consists of data collected between the 2007/2008 and the 2010/2011 seasons. The structure and regulations of the Premier League, however, had raised a preliminary issue. At the end of every season, the bottom three teams are relegated into the Championship (the second division in English football), while the top three teams from the Championship are promoted for the following season. As the Premier League provides a substantial step in difficultly from the Championship, many promoted teams featured in the Premier League for only one season, before being relegated again. Therefore, to avoid using a significantly unbalanced dataset, I only analyse teams that had participated in at least three of the four seasons. Although this reduces the number of teams that I observe to 14, I have sufficiently reduced the proportion of unknowns within the dataset. 2.1 DATA SUMMARY The variables I have analysed can be roughly separated into two categories. The first category of variables, as listed below in the correlation matrix, provides a comprehensive measure of the overall financial position of a club. These variables have been constructed using data from in the Deloitte & Touche Annual Review of Football Finance reports.
Table 1. Correlation matrix: Financial position variables
The strong positive correlation between league position and wage spending and average attendance corresponds with the inferences made by previous literature. By contrast, net transfer spending appears to be negatively correlated with league position, which already suggests that highly inefficient transfer business has been carried out by Premier League clubs, as identified by Szymanski & Kuper (2012). The matrix also finds positive correlations between league position and total revenue. However, as discussed later in this section, this does not necessarily imply that a direct relationship exists between these two variables.
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The second category of variables evaluates the overall stability of the club. The data that I have collated to form these variables are from two online football databases, EUFO Football Squads and World Football Statistics. The table below lists these variables and their suggested relationships with league position:
Table 2. Correlation matrix: Team stability variables
Firstly, the correlation matrix finds negative correlations between both the age-related and league position, thus supporting the findings cited by Van Vugt et al. (2008). I have also included the variable, players used5, as a proxy for high injury rates (Pedace, 2008). I hypothesise that the league position of a club is likely to be adversely impacted by the loss of key players, due to injuries. The negative correlation between the variable and league position certainly supports this theory. As expected, team chemistry portays a relatively strong positive correlation with the dependent variable. This supports the inferences previously made by both Tarlow (2012) and Van Vugt et al.(2008). However, a brief study of the scatter graph and histogram below suggests that a quadratic relationship may exist between the variables.
Figures 1 (left) & 2 (right): Scatter graph plotting team chemistry on league position across all seasons & histogram portraying the distribution of team chemistry
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Appendix 5.1: Variable Description
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This would make sense economically, as teams that consistently change their personnel dramatically each year would fail to sustain a reasonable level of team chemistry. At the same time, teams that have evidently not attempted to improve their team and are more likely to fall behind their rivals. Surprisingly, the matrix finds no difference in correlation between a change in manager during the season and one before the start of a season. This therefore appears to contradict my hypothesis that a managerial change during the season effects league position positively. 2.2 METHODOLOGY The results are generated using a fixed-effects estimation, allowing me to account for unobserved heterogeneity, and thus reduce the level of bias in my estimations. Possible factors that cause bias include the ability of both the players and managers, which are likely to be positively correlated with league position. Table 3: Fixed-Effects Estimation of all independent variables on Log-odds league position
Note: Standard errors in parentheses ** Coefficient statistically significant at the 15% significance level *** Coefficient statistically significant at the 10% significance level
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A preliminary regression of league position on all variables provides some interesting motives for the construction of the final model. Most notably, the coefficient on total revenue is surprisingly statistically insignificant and suggests a negative relationship with final league position. This suggests that total revenue may be better captured as an indirect effect on league position. In theory, a clubs revenue ultimately affects a teams success through investing the money towards improving the team by purchasing better players with naturally higher wage demands. Hence, modelling wage spending as an endogenous variable and total revenue as an instrument within a two-stage least squares IV regression effectively captures the sophisticated triangulate relationship between league position, revenue and wages: First stage: !"!!"#$!!" ! !! !" !"#"$%" Second stage: !!" ! ! ! !!"!! ! !! !" !"#$
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Furthermore, I believe that this model allows me to deal with reverse causality that is likely to exist between total revenue and final league position. Clubs that consistently finish in higher positions are able to improve their teams exponentially, due to the additional revenue they receive, and thus stimulating further success in the league. The first stage regression includes two dummy variables that significantly influence a clubs overall wage spending. UCLit and Europait represent a clubs participation in the UEFA Champions League and the Europa League respectively. As well as generating extra revenue through the further sale of broadcasting rights and match tickets, the participation in European competitions is particularly important in attracting the best players to a football club. In order to improve their own abilities, talented players seek to challenge themselves by playing in the most competitive of environments. They will therefore aspire to join the clubs that regularly finish amongst the top five positions in the Premier League, and subsequently participate in these competitions.
Table 4. Correlation matrix: Endogenous variable and Instrumental Variables
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Table 4 reveals positive correlations between wage spending and both dummies, albeit a clubs participation in the Europa League conveys a significantly weaker relationship. Nevertheless, this justifies the use of these variables as suitable instruments for wage spending. In order to evaluate the true influence of a clubs financial position on success, I run one regression solely on a clubs financial factors, followed by a second that incorporates the stability variables, with the latter representing my final model. This will therefore allow me to compare the estimations of the financial variables between the two models. Moreover, I will be able to identify the factors concerning stability, which contribute most significantly to achieving success.
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Section 3: Empirical Analysis The table below presents the results of the two fixed-effects IV regressions on the dependent variable, the Log-odds League Position. Table 5: Fixed-Effects IV Regression models Model 1 First lag of league position Wage spending Average attendance Net transfer spending Average age Ratio of players aged above 29 Players used Team chemistry Team chemistry2 Managerial change before the start of the season Managerial change before the start of previous season Manangerial change during the season Constant Observations Within R2 F-statistic Probability > F 1.953*** (.8174) 6.460*** (3.790) 0.000000009920 (0.000007030) Final Model -0.2676** (.1847) 0.9485 (1.148) 16.89*** (5.591) 0.00000001510*** (0.000006510) 0.2144 (.1877) -6.051*** (2.633) -0.09446*** (.04926) 0.8353** (.5366) -0.05150 (.03696) -0.4593*** (.2750) 0.5716** (.3496) 0.3923 (.3331) -191.5 (57.28) 45 0.7401 4.43 0.0021
-88.83 (40.38) 63 0.1170 2.68 0.0051
Notes: Standard Errors in parentheses ** Coefficient statistically significant at the 15% significance level *** Coefficient statistically significant at the 10% significance level
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3.1 EMPIRICAL ANALYSIS: FINANCIAL POSITION Wage Spending The coefficients on a clubs annual wage spending prove to be particularly interesting. The first model finds that a 10% increase in a clubs wage spending correlates to an increase of approximately 20% in league position. This suggests that the labour market within the Premier League has continued to be relatively efficient, as players with better ability are being paid higher wages. In the second model, however, the effect of wage spending becomes diminished and statistically insignificant. This suggests that money cannot exclusively buy a club success in the Premier League. Chelsea Football Club provides a clear example of this. Under the ownership of Russian oligarch Roman Abramovich, the club spent on average 25% more (Deloitte, 2007-2011) on their wage bill between 2007 and 2011, compared to their closest rival, Manchester United. Yet despite this, Chelsea only managed to win one of four seasons, while Manchester United won the remaining three. The model therefore infers that while a strong financial position can help significantly in building a team with strong technical ability, team stability is an equally important factor for success. Net Transfer Spending In stark contrast to wage spending, the coefficient on net transfer spending implies that an increase in 1 million in net transfer spending would increase a clubs league position by 1.51%. This infers that clubs are better off making profit from their transfer activities with very little impact in their overall league position, which goes against economic logic. The result thus suggests that an inefficient transfer market continues to exist within the Premier League, as theorised by Syzmanski and Kuper (2012). Average Attendance Both regressions find average attendance to be a considerably important factor in producing Premier League success, to the extent that a 1% increase in attendance would be followed by a 16.9% increase in a clubs league position. This emphasises the contribution that attending audiences can make in encouraging their team to perform on the pitch during a match. Larger crowds are generally able to make more noise, providing a psychological boost for the team they are supporting, and at the same time injecting a level of fear into the opposition. This effect, however, is most prominently witnessed during matches played at a clubs home stadium, in which the majority of the crowd are local supporters. Since all clubs play 19 games each at their own stadium, the impact of crowds on performance should be balanced out fairly across the season. This, therefore, raises the issue regarding the contribution of attendance towards a clubs total revenue. Clubs with larger stadiums tend to receive higher revenue through the sale of match-day tickets. Subsequently, through the wage-spending transmission mechanism, a clubs league position can be improved. It is therefore likely that the positive correlation between attendance and revenue may raise concerns related to bias within the results.
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3.2 EMPIRICAL ANALYSIS: TEAM STABILITY Team Stability Team stability is categorised by the following variables: the first lag of league position, the total number of players used, team chemistry and the age characteristics of the playing squad. Perhaps the strongest proxy for measuring team stability is team chemistry. The model identifies that a higher level of team chemistry will induce better team performances and thus a higher league position. An increase in one point in team chemistry leads to approximately an 84% increase in log-odds league position. To put this into perspective, this effect is evaluated in terms of the changes in actual league position using the following derivative6:
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Hence, at the mean league position, 10th place, an increase in one point translates into a maximum increase of approximately 4 places7. While the coefficient on the squared term of team chemistry is statistically insignificant, it is, however, only just rejected at the 15% significance level. It thus suggests that the existence of a quadratic function is not completely wrong. Interpreting the coefficients implies that team chemistry maximises a clubs league position at approximately 8 points8. In theory, this advises managers to introduce at most several new players to feature regularly each season. In reality, however, managers will regard player ability as substantially more significant than team chemistry. Therefore, they are not likely to hesitate to introduce as many new, highly able players to the team as possible, in expense of sustaining team chemistry. The total number of players used by a team during a season provides a sufficient proxy for the injury rates in a team. The analysis finds that an increase in one player used reduces league position slightly by roughly 9.5%. This relationship corresponds with that found in Pedaces (2008) analysis and implies that a higher number reduces overall team stability, and thus have an adverse impact on league position. That is because a team that uses more players is likely to have experienced periods, in which key players were absent through injury, and as a result, negatively affecting the overall performances of the team. An analysis of the two variables, which measure the age characteristics of a clubs playing squad, produces contrasting results. While, the impact of a squads average age on league position is positive and statistically insignificant, the ratio of players aged above 29 affects league position negatively. The analysis suggests that a 0.1 increase in the ratio reduces league position by approximately 61%.
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Mathematical Appendix 5.3.1 Mathematical Appendix 5.3.2 8 Mathematical Appendix 5.3.3!
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Intuitively, having older players can be highly beneficial to a team, as their experience and knowledge may prove valuable. However, previous literature has shown that the skills
necessary for success in professional athletic sports may decline with age (Berman, Down, & Hill, 2002). Hence, the results suggest that in the increasingly competitive and physical
environment of the Premier League, the athleticism of younger players supersedes the experience brought by older players. In reality, it makes most sense for managers to find a balance between youth and experience that would benefit the team most. Finally, the first lag of league position, rather surprisingly, suggests that teams finishing in higher league positions in a preceding season are likely to finish lower than what the had achieved in the following season. This contradicts Tarlows findings, although that may be explained by the sizeable differences, in terms of the rules and structure, between the NBA and the Premier League. Managerial Stability In contradiction to the relationships previously proposed by the correlation matrix, a managerial change that occurs before the start of a season has a contrasting impact to one that occurs during a season. The model identifies that a change in manager before the start of a season reduces a teams final league position by 45.9%. Once again, evaluating the coefficient at the mean, the change at most reduces league position by 2 places9. Intriguingly, by including a first lag of this variable, the model finds that the same managerial change increases league position by 57.2% in the following season. It thus suggests that a team requires one full season before a managerial change can have its desired effect on team performance. This may be because players need time to understand and adapt to their new managers managing style and tactics. Moreover, a new manager may decide to bring in new players into the team, thus interfering with team stability. The negative correlation identified previously in Table 2 between a change in manager and team chemistry supports this idea. On the other hand, a managerial change during the season causes an immediate increase in final league position by 39.2%. Although the coefficient is statistically insignificant, one can still make logical inferences from the result. Koning (2003) suggests that a change in manager creates a positive impact through a shock effect, where a new coach is able to motivate the players better and can give the team a psychological boost. This is then translated onto the pitch through better results and a higher league position. A change in manager during the season is therefore more likely to occur at a club struggling to achieve wins and is threatened by the prospects of relegation. The table overleaf suggests the total change in actual positions10 that a managerial change has on teams in the bottom three positions of the league, under the assumption that teams around them do not change their manager too.
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Appendix 5.3.4 !Appendix 5.3.5
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Position 18 19 20 1 1 0
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The table suggests that out of the three teams in the relegation zone, only the club residing in 18th position is likely to avoid relegation after a change in manager. In reality, due to the substantial financial benefits that are at stake from retaining a clubs Premier League status, clubs in and close to the relegation zone are likely to take a gamble and replace an under-achieving manager, in a bid to stimulate better performances.
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Section 4. Final Conclusions 4.1 LIMITATIONS AND EXTENSIONS The most evident restriction that lies within my analysis is the limited number of observations that were used. This is caused by several reasons. Firstly, my analysis simply examines data across four consecutive seasons between 2007 and 2011. This relatively short time frame means that the interpretations of each variable may still not provide the best representations of reality. Collating a comprehensive dataset that expands the examined period, possibly even to the induction year of the Premier League in 1992, would certainly improve the overall reliability of the study. Secondly, the number of observations has been constrained by the fact that only clubs that had participated in three of the four seasons were analysed, in order to create a more balanced dataset. This, therefore, meant that lower-ranked teams, who frequently experienced relegation from the Premier League, were much less represented, creating a top-heavy dataset. My analysis could be developed further to incorporate these teams, by running an ordinal probit model with a handful of categories that include one for relegated teams. By evaluating marginal effects, I would be able to identify the levels of each control factor that are required by teams to move between the ordered categories. Finally, there is reason to believe that a large degree of unobserved heterogeneity that I have failed to capture sufficiently within my model. Notably, due to a deficiency in available data, factors relating to the ability of specific players are unobserved. As such, it is not possible to dissect, for example, the effects of particular transfers, which are generally overlooked by the net transfer spending variable. Similarly, the research could be further extended to manager-specific analysis. One can examine, for example, the levels of experience of managing in the Premier League each manager has obtained an element that may strongly determine the individual ability of a manager. Hence, observing these factors would reduce the level of bias that may still exist in the model. 4.2 CONCLUSION This paper set out to evaluate the extent, to which money plays a role in bring success to a Premier League club, and in doing so, highlight how maintaining stability at a club can contribute to success. My findings conclude that whilst a strong financial position does contribute to success in the Premier League, it certainly does not guarantee it. The first model, in which only 11.7% of the variation is explained by the financial variables, justifies this argument. Furthermore, wage spending becomes statistically insignificant, once stability factors have been accounted for, while the impact of a clubs net transfer spending on league position is identified to be minimal. The latter implies that the operations of Premier League clubs in the transfer market remain highly inefficient, and supports the previous findings cited by Szymanski and Kuper (2012).
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The analysis also finds that team stability plays a significant role in determining a clubs final league position, as 74% of variation is explained in my model. The model suggests that stability can be achieved by building a squad with younger, more athletic players, who are able to perform well in a highly competitive environment. At the same time, maintaining a high level of team chemistry contributes to achieving a higher position, through developing a level of understanding on the pitch between regular players and a shared determination to succeed. Finally, managerial stability is recognised as a significant factor affecting league position. The findings show that a change in manager before the start of season reduces league position, implying that retaining a manager proves to be the best option for a club. However, the impact of a managerial change during the season suggests the opposite. A change during the season is typically associated with teams that are struggling to achieve results and are being threatened by relegation. Hence, the club hierarchy look for a solution to stimulate a recovery to avoid relegation. Particularly with the substantial financial incentives from maintaining a Premier League status at stake, disregarding managerial stability to improve results may prove to be the most beneficial decision.
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Section 5. Appendix 5.1 VARIABLE DESCRIPTIONS Log-odds league position A log function of the final league position achieved by a team in a given season in the Premier League. The function has been adapted from Szymanski (2000), giving weight in value to higher league positions. First lag of league position The first lag of the dependent variable. This represents the position that a club finished in at the end of a preceding season. (Log) Wage spending The total spending on wages at a Premier League club, including players and staff. Net Transfer spending The sum of transfer fees received from selling players minus the sum of transfer fees paid for buying players. Average squad age The mean age of the clubs playing squad. These were calculated using squad lists accumulated by the EUFO Football Squads database. Ratio of players aged above 29 The percentage of players in the playing squad that are aged 30 or above. Both the media and fans perceive the age 30 as the age, when a players value starts to depreciate considerably, due to his loss in athleticism. Total number of players used The total number of players that have made an appearance in the Premier League in a given season, calculated using data from the World Football Statistics database. This is used as a proxy for the injury rates in a squad, as a higher number of players used suggest that key players have been missing through injury at some point during the season and managers must call upon the less regular players in the squad. Team chemistry Team chemistry is calculated by comparing the group of players who have played the most minutes in a given season (using data from the World Football Statistics database), with the equivalent group in the previous season. A point is allocated for every player who features in both groups, allowing a maximum of 11 points, representing complete team chemistry. The variable assumes that players who play the most are more likely to have played with each other more frequently, allowing them to develop a shared understanding on the pitch, as well as a shared motivation to bring success to their club. Managerial change before the start of the season A change in the clubs managerial position that occurs during the summer break, before the start of a new Premier League season. This type of change may be triggered by a decision made by the current manager, as he may, for example, be looking for a new challenge and subsequently resigning from his current role. It may also be triggered by the club hierarchy, who are looking to progress the club further by replacing their current manager with one that may have more ability and experience. The first lag of the variable is also generated to capture a managerial change that occurs before the start of the previous season.
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Managerial change during the season A change in the clubs managerial position that occurs in the middle of a season. This type of change typically occurs at a club struggling to achieve results and may be threatened by the prospects of relegation. The club hierarchy may therefore decide to replace the manager and bring in a new manager with different ideas and tactics, in a bid to boost team morale and stimulate performances. 5.2 MATHEMATICAL APPENDIX
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Section 6. Bibliography 6. BIBLIOGRAPHY Books Kuper, S. and Szymanski, S. (2012) Soccernomics. Revised ed. New York: Nation Books. Journals Berman, S., Down, L., Hill, J. and Charles, W. L. (2002) Tacit knowledge as a source of competitive advantage in the National Basketball Association. Academy of Management Journal, Volume 45, No. 1, p. 13-31. Koning, R. H. (2003) An econometric evaluation of the firing of a coach on team performance. Applied Economics, Volume 35, No. 5, p. 555-564. Pedace, R. (2008) Earnings, Performance, and Nationality Discrimination in a Highly Competitive Labor Market: An Analysis of the English Professional Soccer League Journal of Sports Economics April 2008 vol. 9 no. 2, pp.115-140. Szymanski, S. (2000) A Market Test for Discrimination in the English Professional Soccer Leagues. Journal of Political Economy, Volume 108, no.3, pp.590-603. Publications Tarlow, J. (2012) Experience and Winning in the National Basketball Association. Paper for the MIT Sloan Sports Analytics Conference 2012, Boston, March 2-3 2012. Van Vugt, M., Hart, C., & Leader, T. (2008) Does stability foster team performance? A European Football (Soccer) Inquiry, VU University Amsterdam. Vlassopoulous, A. (2009) Determinants of NFL Franchise Revenue Generation. Bachelor of Arts Thesis. The Colorado College. Reports Deloitte & Touche (2008), Deloitte Annual Review of Football Finance 2008, Issue 17. Deloitte & Touche (2009), Deloitte Annual Review of Football Finance 2009, Issue 18. Deloitte & Touche (2010), Deloitte Annual Review of Football Finance 2010, Issue 19. Deloitte & Touche (2011), Deloitte Annual Review of Football Finance 2011, Issue 20. The Football Association Premier League Limited (2008), Premier League 2007/08 Season Review.
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The Football Association Premier League Limited (2009), Premier League 2008/09 Season Review. The Football Association Premier League Limited (2010), Premier League 2009/10 Season Review. The Football Association Premier League Limited (2011), Premier League 2010/11 Season Review. Online Databases EUFO: European football squads since 1999, (URL http://en.eufo.de/). World Football Statistics, (URL http://www.worldfootball.net/wettbewerb/eng-premierleague/).
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An Analysis of The Determinants of Success in The Premier League: Does Money Guarantee Success?

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An Analysis of The Determinants of Success in The Premier League: Does Money Guarantee Success?

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EC331: Research in Applied Economics

Terry Tsz Chun Wong

Terry Tsz Chun Wong 1001519

Terry Tsz Chun Wong 1001519

Terry Tsz Chun Wong 1001519

Terry Tsz Chun Wong 1001519

Appendix 1.1: Variable descriptions Appendix 1.1: Variable descriptions

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Appendix 5.1: Variable Description

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