International Journal of Sport Finance, 2023, 18, 71–83, © 2023, West Virginia University

Does Foreign Investment Affect Sporting and

Managerial Efficiency? The Case of
English Football Clubs
José Manuel Cordero1, Julio del Corral2, Carlos Gomez-Gonzalez3, and Cristina Polo1

1University of Extremadura
2University of Castilla-La Mancha
3University of Zurich
José Manuel Cordero, PhD, is a professor in the Department of Economics at the University of Extremadura. His re-
search interests include efficiency measurement in the public sector, the economics of education, and fiscal federalism.
Julio del Corral, PhD, is a professor of economics at the University of Castilla-La Mancha. His current research focuses
on the economics of sports, specifically the topics of behavior, betting, competitive balance, demand, discrimination,
efficiency, and productivity. He is the corresponding author for this article.
Carlos Gomez-Gonzalez, PhD, is a postdoctoral research fellow in the Department of Business Administration at the
University of Zurich. His research interests include quantitative analyses and field experiments that analyze ethnic and
racial discrimination, gender biases, and policy effectiveness in a sports setting.
Cristina Polo, PhD, is an associate professor in the Department of Economics at the University of Extremadura. Her
research interests include the computational aspects of efficiency measurement and its application in education, health,
and municipal services.

Abstract
The number of foreign owners in football clubs has recently increased in Europe and especially in England. This study
aims to analyze whether clubs owned by foreign investors show different parameters of sporting and managerial
efficiency. We use data on expected performance (from betting odds), wage costs, and the results of football clubs in
the English Premier League (EPL) and English Football League Championship (EFL) over 13 seasons. We estimate
different measures of efficiency using three alternative methods: expected vs. actual performance index, nonparamet-
ric conditional data envelopment analysis (DEA), and stochastic frontier, while considering foreign ownership as an
exogenous factor. Our results suggest that there are not significant differences between domestic- and foreign-owned
clubs.
Keywords: efficiency, football, foreign owners, betting odds, wage costs
JEL Classifications: F21, Z23
DOI: https://doi.org/10.32731/IJSF/182.052023.02

Introduction
Foreign investment in European football clubs has increased in recent years. China, the United States, and Russia provide
the largest sources of foreign investment (UEFA, 2016). The two highest football divisions in England, i.e., the English
Premier League (EPL) and English Football League Championship (EFL), top the list with respect to foreign club owner-
ship. In these leagues, more than half of the clubs are managed by foreign owners, which mainly come from the United
States, e.g., Arsenal, Liverpool, or Manchester United.
The influence that foreign capital has on the managerial model and sporting results is yet to be fully understood as the
number of existing contributions on this topic is still limited. Rohde & Breuer (2017) reported that the literature mainly
focuses on the relationship between foreign investment and financial performance. In contrast, the number of studies
analyzing the impact of foreign investment on sporting results is rather small. The empirical work conducted by Wilson et
al. (2013) is a noticeable precedent. More recently, Rohde & Breuer (2018) incorporated the concept of efficiency to analyze
the influence of foreign investment on sporting success.

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The aim of the paper is twofold. First, we contribute to the literature by exploring the difference between expected and
actual sporting performance by type of ownership. We measure what we label as “sporting efficiency” by applying three
alternative methods to test the robustness of the results. Namely, the methods are the expected-vs.-actual performance
index—a measure based on expectations introduced by del Corral, Maroto, and Gallardo (2017)—the nonparametric data
envelopment analysis (DEA) and the stochastic frontier analysis (SFA).1 The sample includes data from clubs that compete
in EPL and EFL and covers a 13-year period from the 2003‒2004 season through the 2015‒2016 season, which extends
notably the contribution made by Rohde and Breuer (2018).
Second, we contribute to the literature with a new indicator of managerial efficiency, which relies on expected sporting
performance rather than on actual results. To the best of our knowledge, no previous study investigates managerial effi-
ciency using expected results (from betting odds) as an output. Particularly, we estimate a production function using the
wage costs of clubs as input and the expected number of points as output. This approach allows us to examine whether
large investments in playing talent result in a proportional increase in expected performance.
The rest of the paper is organized as follows. The second section provides the theoretical framework with a focus on
efficiency measures and foreign investments in team sports. The third section describes the efficiency estimation methods
and the data/variables used in the empirical analysis. The fourth section shows the main results and discusses the find-
ings. The final section concludes the paper.

Literature Review and Theoretical Framework

Measuring Efficiency in Team Sports
The literature on efficiency in team sports is vast.2 In those studies, the common practice consists of using a production
function to estimate relative measures of efficiency or efficiency scores. For this purpose, the selection of input and output
variables is a key issue. If the researcher is mainly interested in sporting efficiency, these scores will be a representation of
the ability demonstrated by clubs to convert available talent into wins (Lee, 2006; Lee & Berri, 2008). Therefore, the output
is usually the number of points at the end of the season or the final ranking position.3 The selection of input variables is
more heterogeneous, but research often relies on ex ante data to create measures of team talent (Lee, 2006). Once the in-
put-output selection is defined, different frontier methods can be applied to estimate sporting efficiency measures. These
include nonparametric approaches, among which DEA is the most frequent option, and parametric approaches, among
which SFA stands out.
A relevant strand of the literature on efficiency measurement with DEA is concerned with the effect of some vari-
ables on (in)efficiency scores. In an SFA framework, it is typical to use one-step models in which the production frontier
and the inefficiency determinants are estimated simultaneously to avoid econometric problems. Caudill et al. (1995)
introduced one of these models where the determinants of inefficiency are evaluated in a multiplicative heteroscedastic
framework. In this paper, we rely on DEA and SFA models to measure sporting efficiency and additionally include the
expected-vs.-actual performance index based on expectations from betting odds (del Corral et al., 2017).
Previous research also examines non-sporting efficiency, that is, the efficiency of club managers/owners. These studies
include capital measures as input and financial performance measures as output (e.g., Barros & Leach, 2006; Feng & Jew-
ell, 2018). To further develop this approach, this paper proposes to measure managerial efficiency as the capacity of club
administrators to translate players’ wage costs into expected points.
On a conceptual level, we use the term “sporting efficiency” to refer to the ability of sport teams to transform team
quality into points and the term “managerial efficiency” to refer the ability of the teams to transform wage costs into
expected points.4 Note the difference between both concepts. While sporting efficiency is a measure that basically reflects
on-field results based on decisions such as play time allocation among players, tactical positioning, or substitutions, man-
agerial efficiency is a measure that basically captures the ability to transform wage costs into expected points with deci-
sions such as timely signings, strategic communication, and dismissals. We incorporate the origin of the capital (domestic
or foreign) as the explanatory variable that might affect both efficiency measures.

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 Does Foreign Investment Affect Sporting and Managerial Efficiency?

The Effect of Foreign Investment in Sports: Background and Hypothesis

England, France, Germany, Italy, and Spain are the countries hosting the so-called Big Five European football leagues, in
which most clubs are no longer membership-based clubs such as FC Barcelona but are organized as stock-corporation or
limited company.5 Hence, investors could buy football teams by acquiring the majority of a club’s capital. The exception
is Germany, with the so-called 50+1 rule, by which the members association must continue to hold at least 50% plus one
of the voting rights of the club.6
Elite football clubs with worldwide impact are very attractive not only to domestic investors but also to foreign capital.
Table A1 (Appendix) shows the evolution of foreign-owned clubs in Bundesliga (Germany), EPL and EFL (England), La
Liga (Spain), Ligue 1 (France), and Serie A (Italy) since the 2003‒2004 season. We notice that the influence of foreign
ownership is only prominent in England in this period and therefore focus exclusively on the EPL and EFL.
The diversity of owners’ objectives in football leagues (profit vs. win maximization) has a definitive influence on the
managerial decisions adopted by clubs as well as on their financial and/or sporting outcomes. This debate is extensive
in the sport economics literature (Fort, 2015; Fort & Quirk, 1995; Késenne, 1996). In England, Garcia-del-Barrio and
Szymanski (2009) found that choices are more closely associated with win-maximization objectives. Indeed, empirical
studies show that foreign owners make larger investments in European football clubs (Rohde & Breuer, 2016a, 2016b),
which lead these clubs to higher positions in the league ranking (Wilson et al., 2013).
However, the number of empirical studies that deal with the influence of foreign investment on efficiency is limited.
Some studies focusing on analyzing managerial efficiency from a financial point of view suggest that foreign private own-
ership has a negative impact (Wilson et al., 2013; Rohde & Breuer, 2016b; Sánchez et al., 2017). Scarcer is the literature on
sporting efficiency. Rohde and Breuer (2018) analyzed the sporting efficiency of EPL and Ligue 1 (France) clubs between
2006 and 2012 using a time-varying stochastic frontier model. The authors concluded that a majority foreign investment
has a significant negative influence on the sporting efficiency of football clubs in both leagues. The present work is intend-
ed to continue this emerging line of research.
If a football club is a stock company, then it implies that it can be bought by either domestic or foreign investors.
If the investor is domestic, the president is usually someone with some previous link to the club, e.g., a former player,
member of the board of directors, or well-known representative. An in-house president is more likely to be aware of the
traditions and idiosyncrasies of the club. If the investor is foreign, clubs usually appoint foreign presidents (private owners
or representative of corporate groups).7 Outside managers might not be familiar with the traditions of the club or have
sport-specific managerial experience but are also more likely to avoid sentimental biases.
Rohde and Breuer (2018) argued that foreign private majority investors can inject additional external financial re-
sources, which may in turn increase the potential risk of overinvestment (Dietl et al., 2008). Based on previous research
on sporting efficiency, c.f., Rohde and Breuer (2018), and insights on managerial sports tasks, we formulate the following
hypotheses:
H1: Foreign-owned clubs have lower sporting efficiency than domestic-owned clubs.
H2: Foreign-owned clubs have lower managerial efficiency than domestic-owned clubs.

Methodology and Data

Methods
As mentioned, this study computes two types of efficiency measures: sporting efficiency and managerial efficiency. To test
the robustness of clubs´ sporting efficiencies, we use three alternative methods. First, we apply the expected-vs.-actual
index. This approach, developed by del Corral et al. (2017), defines efficiency scores as the inverse of the sum of the proba-
bilities (from betting odds) of achieving more points than the actual ones. Second, we apply the nonparametric DEA and
the SFA approaches. Specifically, we use the conditional DEA approach developed by Daraio and Simar (2007) and the
stochastic frontier model developed by Caudill et al. (1995), which allows the analysis to incorporate foreign ownership
as an exogenous factor (Z).

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Each methodology is applied separately for each season and league. The reason is that merging data from different
seasons and leagues could lead to meaningless input variables since in recent years there has been a clear tendency for
higher budgets, which determines the value of the teams. In the following lines, we provide a detailed explanation of the
three approaches.
Expected-vs.-Actual Performance
Odds for football matches offered in the betting market can be converted into probabilities for each possible match result
(i.e., home win, draw, and away win). If the betting market is efficient, then these probabilities must reflect the true proba-
bilities of each event. There is no clear consensus in the literature as to whether betting odds are efficient or not. However,
since the expected rate of return to bettors has an upper bound of zero (Sauer, 1998), Forrest and Simmons (2008) stated
that at least weak efficiency appears to characterize this market. Therefore, the probabilities embedded in betting odds
could be used as prior probabilities and hence be useful to calculate the expected results (Humphreys et al., 2016; van
Ours & van Tuijl, 2016; del Corral et al., 2017).
To ameliorate some of the possible biases of the odds, it might be useful to use the average odds from various book-
makers rather than using one bookmaker alone. The website www.football-data.co.uk provides the closing odds for most
European football leagues from several bookmakers. Specifically, we used the average odds from Bet365, Gamebookers,
Interwetten, Ladbrokes, and William Hill. This average was computed using the maximum number of odds available
among these bookmakers for each match.
Basic probability theory states that the joint probability of two independent events (e.g., a victory by the same club
in two different football matches) equals the product of their probabilities. This simple formula for all the possible com-
binations of match results of each club can be used to compute the probability of each club within a league obtaining a
certain number of points, i.e., the density function of points at the end of the season (Gomez-Gonzalez et al., 2019). Figure
1 provides an example. The figure shows the density function of victories for Chelsea and Leicester in the 2015‒2016 sea-
son—examples of underperforming and overperforming clubs, respectively. The vertical lines indicate the actual number
of points in that season.

Density functions for Leicester and Chelsea 2015–2016

Figure 1. Two examples of efficiency from betting odds

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 Does Foreign Investment Affect Sporting and Managerial Efficiency?

From these density functions, it is possible to calculate the probability of obtaining more points than the actual ones
(del Corral et al., 2017). In Figure 1, the sum of the probabilities of obtaining more than 82 points (actual result) is vir-
tually zero for Leicester, and hence the inverse of this sum is a value close to one—high sporting efficiency. For Chelsea,
the sum of the probabilities of obtaining more than 51 points (actual result) is 0.984, and hence the inverse of this sum is
0.016—low sporting efficiency. The inverse of the sum of the probabilities of obtaining more points than the actual ones
is interpreted as an efficiency index (del Corral et al., 2017). Teams scoring high on this index perform above expectations
(according to betting odds) and therefore are likely to obtain a higher-ranking position in the league.
Conditional DEA
DEA can be defined as a nonparametric frontier technique based on linear programming that constructs an efficient
production function from best-practice units (football clubs in our case) so that the inefficiency of the rest of the units in
an output-oriented model can be measured as a distance from the boundary (Farrell, 1957):

(1)

Therefore, the efficiency score is a relative measure on a scale between 0 and 1, where the value 1 signifies that the club
is efficient and all the other values below 1 indicate that the club is not efficient and where inefficiency is the difference
between the club’s efficiency score and 1. This technique does not impose a specific functional form for the production
frontier but rather establishes certain assumptions about the properties of production technology.
To account for the influence of a contextual factor (foreign ownership), we adopt the conditional approach developed
by Daraio and Simar (2005, 2007) and based on the previous work by Cazals et al. (2002). This approach allows the esti-
mation to account for this variable by conditioning the production process to a given value of the variable (Z = z):

(2)

This represents the probability of a unit operating at level (x, y) being dominated by other units facing the same envi-
ronmental conditions. This probability function can be decomposed into two terms: the survival conditional function
of outputs (SY|X,Z(y|x,z) and the conditional distribution function of inputs (FX|Z(x|z). Therefore, the output efficiency
measure can analogously be defined as:

(3)

The nonparametric estimators of the conditional frontier λ(x,y|z) can be defined by a plug-in rule providing conditional
estimators of the full frontier. In this study, we use the DEA estimator proposed by Daraio and Simar (2007), which im-
plies a frontier built from real as well as fictitious units since we are assuming a convex technology.
This approach also allows us to explore whether the influence of the exogenous factor is positive, negative, or neu-
tral. This can be performed through the analysis of the ratio between the conditional and the unconditional estimators
(Q = λ(x,y|z)/λ(x,y)). Specifically, we will explore a scatter plot of the ratio between these estimated measures against Z and
its smoothed nonparametric regression line to capture the marginal effect of Z on the frontier shifts. In an output-ori-
ented conditional model, an increasing regression line will indicate that Z is favorable to efficiency whereas a decreasing
line will denote an unfavorable effect. Likewise, it is also possible to test the statistical significance of the effect of Z in
the production process using the nonparametric regression significance test proposed by Racine (1997), which can be
interpreted as the nonparametric equivalent of standard t-tests in ordinary least squares (OLS) regression (De Witte &
Kortelainen, 2013).
Stochastic Frontier Analysis
The stochastic production function was originally developed by Aigner et al. (1977) and is usually estimated by maximum
likelihood techniques. Contrary to the DEA, this method is based on an econometric (i.e., parametric) specification of the
production frontier. Using a Cobb-Douglas production function with one input, this method can be depicted as follows:

(4)

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Cordero, del Corral, Gomez-Gonzalez, Polo

where y represents output, x is the unique input, β is a vector of unknown parameters, ε is the error-term, and i represents
the club in a specific season.
In this specific formulation, the error-term is composed of two independent components: εi = vi – ui. The first element,
vi, is a random variable reflecting noise and other stochastic shocks entering into the definition of the frontier, such as
injuries, luck, and referee decisions. This term is assumed to be an independent and identically distributed normal ran-
dom variable with zero mean and constant variance. The second component, ui, captures technical inefficiency, and it is
assumed to follow a one side distribution (e.g., half normal, truncated normal, exponential).
An index for efficiency (Eff ) can be defined as the ratio of the observed output (y) and maximum feasible output (y*):

(5)

Hence, the Eff index is bounded between 0 (u → ∞) and 1 (u = 0). Eff achieves its upper bound when a club is producing the
maximum output feasible level (i.e., y = y*), given the input quantities.
Caudill et al. (1995) extended this framework to analyze the extent to which certain exogenous factors might influence
the inefficiency term ui. Specifically, these authors developed a model in which the determinants of inefficiency are eval-
uated using a multiplicative heteroscedasticity framework:

(6)

where z is a dummy variable. In our framework, this variable takes the value 1 if the club has foreign ownership and 0 oth-
erwise. Finally, α is an unknown parameter. Given that the inefficiency is assumed to follow a half-normal distribution,
a decrease in the variance will lead to increments in the efficiency level. Therefore, a positive sign for α implies that effi-
ciency is negatively correlated with foreign club ownership. Following this approach, the parameters for the production
frontier and for the inefficiency model are estimated jointly (Caudill et al., 1995).

Data
This study uses data from the EPL and EFL as these leagues hold the highest proportion of foreign-owned clubs in Eu-
rope. Specifically, the analysis includes data from the 2003‒2004 to 2015‒2016 period. We use www.football-data.co.uk to
extract betting odds data.
The selection of variables used to estimate sporting efficiency follows previous research in sports economics. We use
the number of points as output (Lee & Berri, 2008) and the market value of the team at the beginning of each season
provided by www.transfermarkt.com as input (Lee et al., 2015).8 Finally, as previously mentioned, we define the variable
foreign property as a dummy variable that takes the value of 1 if more than 50% of the club’s share capital belongs to
foreign investors and zero otherwise.
To analyze managerial efficiency, we use the wage cost from the UK Annual Review of Football Finance reports from
Deloitte as input (e.g., Deloitte, 2017). This data is not available for EFL and therefore restricts our analysis of managerial
efficiency to the EPL only.

Results and Discussion

Sporting Efficiency
Prior to the calculation of efficiency measures, we perform an exploratory analysis of the effect of foreign investment on
points and expected points for both leagues. This can be easily computed using betting odds, as reported in Table 1.
The results show that there are not significant differences in either points or expected points in the EFL. However,
the differences in both points and expected points between foreign-owned and domestic-owned clubs are significant
in the EPL. This finding supports previous papers analyzing performance and foreign ownership in the EPL (Wilson et
al., 2013). However, the results could be driven by preferences of foreign investors for big clubs such as Arsenal, Chelsea,
Manchester City, Manchester United, or Liverpool.

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 Does Foreign Investment Affect Sporting and Managerial Efficiency?

Table 1. Effect of Foreign Investment on Points and Expected Points in EPL and EFL (2003/04‒2015/16)

English Premier League English Football League Championship

Points Expected Difference n Points Expected Difference n

points points

Domestic ownership 48.6 48.7 -0.2 152 62.3 62.5 -0.2 236

Foreign ownership 57 56.7 0.3 108 63.2 63.2 0.0 76

Difference -8.4 -8.0 -0.5 -0.9 -0.7 -0.2

p value 0.000 0.000 0.573 0.619 0.477 0.862

Table 2. Change in Points and Expected Points in the First Year of Foreign Owner

Points Expected Points

League
n Last domestic First foreign p value Last domestic First foreign p value

English Premier League 8 56.3 57.5 0.870 55.1 56.4 0.851

English Football League 6 61.7 64.2 0.700 61.4 63.9 0.461

Championship

Both 14 58.6 60.4 0.725 57.8 59.6 0.667

Hence, to fully capture the effect of this type of ownership, further analyses are needed. First, we provide an insight about
the influence of the type of ownership on the efficiency of clubs. The difference between points and expected points among
type of ownership is small and the differences between them are nonsignificant according to the results of the t-tests con-
ducted. This result implies that both types of clubs seem to perform according to their expectations in both leagues.
In our sample, we register 29 clubs that receive an inflow of foreign capital, but only 14 of them are in the same division
the year before the investment and the year of the investment. Thus, we use these 28 observations to analyze the influence
of a change in the type of ownership. In Table 2, we display the variation in actual and expected points for those clubs.
We can observe that the difference in the average points of clubs with foreign investment (60.4 points) increased with
respect to the previous season (58.6 points), but this difference is not significant. Similarly, the expected points (from bet-
ting odds) in the season of the change (59.6 points) are not significantly different from the previous season (57.8 points).
Therefore, these results suggest that the inflow of foreign capital appears to lead to a slight increase in the actual and
expected performance of the clubs. However, this shock is not sufficient to trigger a significant change in the immediate
future of the club.
In this section, we display the efficiency measures estimated for clubs with foreign and domestic owners using the
three methods described in earlier. First, we calculate the efficiency levels using the method proposed by del Corral et
al. (2017) and compute differences among different types of clubs using t-tests for each season and each league (EPL in
Table 3 and EFL in Table 4). According to the t-test results, there are not significant differences in efficiency between
clubs with domestic and foreign ownership, neither seasonally nor aggregated. In the EPL, the average of the efficiency of
domestic-owned clubs was 0.51 and foreign-owned clubs 0.54, whereas in the EFL, the average of the efficiency of domes-
tic-owned clubs was 0.50 and foreign-owned clubs 0.51. Therefore, it seems that foreign-owned clubs were slightly more
efficient than domestic-owned clubs, but the difference was not significant.
Next, we calculate efficiency measures using the conditional DEA and the SFA approaches for both leagues (Tables 5
and 6). Generally, the scores estimated for those models corroborate the previous results, although we can detect a certain
advantage of clubs with foreign investors in the EPL for estimates calculated with DEA (mean average of 0.95 vs. 0.90 for

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Table 3. Sporting Efficiency t-test by Type of Ownership from

del Corral et al. (2017) in the EPL

Domestic Ownership Foreign Ownership

Season Efficiency n Efficiency n t-test

(mean) (mean) (p-valor)

2003‒2004 0.46 17 0.74 3 0.099

2004‒2005 0.47 17 0.61 3 0.436
2005‒2006 0.54 16 0.71 4 0.370
2006‒2007 0.49 14 0.59 6 0.445
2007‒2008 0.44 10 0.63 10 0.192
2008‒2009 0.41 11 0.65 9 0.091
2009‒2010 0.49 11 0.56 9 0.553
2010‒2011 0.52 11 0.49 9 0.741
2011‒2012 0.63 10 0.44 10 0.200
2012‒2013 0.55 9 0.47 11 0.457
2013‒2014 0.59 9 0.52 11 0.665
2014‒2015 0.58 9 0.49 11 0.422
2015‒2016 0.58 8 0.43 12 0.293
All seasons 0.51 152 0.54 108 0.487

Table 4. Sporting Efficiency t-test by Type of Ownership from

del Corral et al. (2017) in the EFL

Domestic Ownership Foreign Ownership

Season Efficiency n Efficiency n t-test

(mean) (mean) (p-valor)

2003‒2004 0.50 22 0.70 2 0.323

2004‒2005 0.49 21 0.51 3 0.934
2005‒2006 0.46 21 0.36 3 0.586
2006‒2007 0.56 21 0.56 3 0.996
2007‒2008 0.50 22 0.34 2 0.377
2008‒2009 0.51 23 0.36 1 --
2009‒2010 0.51 21 0.37 3 0.426
2010‒2011 0.49 18 0.65 6 0.207
2011‒2012 0.53 16 0.50 8 0.850
2012‒2013 0.51 14 0.56 10 0.597
2013‒2014 0.48 12 0.47 12 0.981
2014‒2015 0.49 12 0.55 12 0.671
2015‒2016 0.50 13 0.47 11 0.838
All seasons 0.50 236 0.51 76 0.825

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 Does Foreign Investment Affect Sporting and Managerial Efficiency?

Table 5. Effect of Ownership on Sporting Efficiency in Production Functions in the EPL

Conditional DEA (Daraio & Simar, 2007) Stochastic Frontier (Caudill et al., 1995)
Average efficiency Average efficiency
z (p value) Influence Domestic Foreign βχ z Domestic Foreign

2005‒2006 0.40 Unfavorable 0.94 0.98 0.27*** -0.71 0.75 0.79

2006‒2007 0.35 Favorable 0.87 0.92 0.27*** -2.53 0.97 0.99
2007‒2008 0.28 Unfavorable 0.93 0.93 0.3*** 0.78 0.75 0.76
2008‒2009 0.72 Unclear 0.87 0.95 0.38*** -0.47 0.75 0.84
2009‒2010 0.32 Unfavorable 0.88 0.95 0.3*** -0.15 0.77 0.83
2010‒2011 0.37 Unfavorable 0.95 0.95 0.31*** -0.03 0.86 0.83
2011‒2012 0.53 Favorable 0.87 0.90 0.22*** 0.10 0.75 0.71
2012‒2013 0.56 Favorable 0.94 0.94 -- -- -- --
2013‒2014 0.84 Favorable 0.85 0.97 0.45*** 1.77 0.94 0.86
2014‒2015 0.49 Favorable 0.95 0.97 0.28*** 0.66 0.83 0.80
2015‒2016 0.17 Favorable 0.80 1.00 -0.09*** 0.19 0.64 0.71
All seasons 0.90 0.95 0.80 0.80
Notes: * p < 0.10, ** p < 0.05, *** p < 0.01.

Table 6. Effect of Ownership on Sporting Efficiency in Production Functions in the EFL Championship

Conditional DEA (Daraio & Simar, 2007) Stochastic Frontier (Caudill et al., 1995)
Average efficiency Average efficiency
z (p value) Influence Domestic Foreign βχ z Domestic Foreign

2005‒2006 0.87 Unfavorable 0.98 1.00 0.04 31.86 1.00 0.95

2006‒2007 0.37 Unfavorable 0.91 0.94 0.18*** 1.21 0.98 0.96
2007‒2008 0.15 Unfavorable 0.99 0.98 0.13*** 27.42 1.00 0.90
2008‒2009 0.04** Favorable 0.93 1.00 0.14** -0.27 0.82 0.82
2009‒2010 0.91 Unfavorable 0.91 0.98 0.25*** 0.67 0.94 0.92
2010‒2011 0.54 Unfavorable 0.96 0.97 0.08 -2.28 0.81 0.93
2011‒2012 0.88 Unfavorable 0.95 0.99 0.18** -1.39 0.81 0.89
2012‒2013 0.57 Unfavorable 0.92 0.97 -- -- -- --
2013‒2014 0.87 Unclear 0.95 0.97 0.17* -0.99 0.91 0.94
2014‒2015 0.24 Favorable 0.91 0.99 -0.01*** -0.46 0.70 0.70
2015‒2016 0.06* Unfavorable 0.93 0.95 0.38*** 33.71 1.00 0.87
All seasons 0.94 0.97 0.91 0.87
Notes: * p < 0.10, ** p < 0.05, *** p < 0.01.

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Cordero, del Corral, Gomez-Gonzalez, Polo

domestic ownership). Nevertheless, since these methods allow us to test whether the influence of the exogenous variable
is significant or not, we observe that the effect of our dummy variable representing the type of ownership is not significant
in any season for the EPL and only in one season (2008‒2009) for the EFL.
The efficiency scores estimated with the stochastic approach reflect similar values for both types of clubs. It is also
worth mentioning that the model did not achieve convergence in one season and that the coefficient of the input was
negative in the last season; thus, the monotonicity property is not satisfied. In the remaining seasons, the input coefficient
ranges between 0.22 and 0.45, which implies an expected concave production function. Concerning the z, there is only
one season with a significant coefficient for the EPL (0.10 significance level) and none for the EFL. Therefore, we do not
find any consistent statistical effect of the type of property on efficiency.
Previous research shows a negative relationship between foreign-ownership and financial (Wilson et al., 2013; Rohde
& Breuer, 2016b; Sánchez et al., 2017) and sporting (Rohde & Breuer, 2018) efficiency. Our findings show a nonsignificant
influence that might be of interest for clubs and fans.

Managerial Efficiency
Finally, we analyze the effect of the type of ownership on the managerial efficiency in the EPL. For this purpose, we
estimate production functions for each season following Caudill et al. (1995) and include the foreign ownership dummy
as explanatory of the efficiency. The wage bill from Deloitte is used as the input and the expected number of points from
betting odds as the output.
In line with previous results, the foreign ownership dummy was not significant in any of the seasons. Table 7 shows the
average of the efficiency in each season by type of ownership. The results show that domestic-owned clubs are just a bit
more efficient than foreign-owned clubs. These findings reinforce the result that the type of ownership has no significant
effect on efficiency in English football.9

Table 7. Managerial Efficiency by Ownership Type from

Caudill et al. (1995) in the EPL

Domestic ownership Foreign ownership

Season Efficiency (mean) n Efficiency (mean) n

2003-2004 0.94 17 0.89 3

2004-2005 1.00 17 0.95 3
2005-2006 0.97 16 1.00 4
2006-2007 0.92 14 0.91 6
2007-2008 0.90 10 0.85 10
2008-2009 0.90 11 0.86 9
2009-2010 0.91 11 1.00 9
2010-2011 1.00 11 0.97 9
2011-2012 1.00 10 0.94 10
2012-2013 1.00 9 0.90 11
2013-2014 1.00 9 0.96 11
2014-2015 0.95 9 0.89 11
2015-2016 0.89 8 0.88 12
All seasons 0.95 152 0.92 108

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 Does Foreign Investment Affect Sporting and Managerial Efficiency?

Concluding Remarks
This study focuses on the sporting and managerial efficiency of English football clubs. Specifically, the analysis focuses
on the influence that foreign-owned clubs have on actual (points) and expected (win probabilities) performance and uses
different methods to estimate efficiency. We hypothesize that foreign-owned clubs have lower managerial and sporting
efficiency than domestic-owned clubs. However, the results reject the hypotheses by showing that the type of ownership
(foreign vs. domestic) does not have a significant influence on the sporting and managerial efficiency. The evidence is
consistent when using all proposed methods: DEA, SFA, and performance relative to expectations.
Our results have implications for professional football leagues and fans concerned about inefficiencies due to type
of ownerships. The analysis of performance relative to expectations is important when discussing foreign investment
in football clubs. Beyond analyzing sporting efficiency, we propose a new index of managerial efficiency that computes
expected results of clubs as output dependent on wage costs. Foreign- and domestic-owned clubs do not report significant
differences either.
Our study also has limitations that open opportunities for further research. First, we only use data from English foot-
ball. Hence, this study could be extended by analyzing data from other leagues and incorporating recent data. Second, we
determine whether or not a club is foreign-owned by simply constructing a dummy variable with value 1 for teams where
a foreign investor has the majority of the capital. Breaking down this definition and including public vs. private features
is a relevant extension for future research. Third, we only analyze sporting and managerial efficiency and, therefore,
omit anything related to financial aspects of managerial efficiency. Finally, we overlook a possible “learning-by-doing”
effect, which is more likely to affect outsider managers without club- and sport-specific knowledge in the first years after
a takeover. A more extensive dataset could examine learning-by-doing effects in managerial positions in professional
sports clubs.

Endnotes
1 Performance relative to expectations has been introduced in the economic literature to analyze the dismissals of coaches using betting
data (e.g., Pieper et al., 2014; Humphreys et al., 2016; van Ours & van Tuijl, 2016) and the demand in professional sports (Gomez-Gon-
zalez et al., 2016).
2 Jamil (2019) showed a recent survey about this topic and extended the previous contribution of Lee (2006).
3 Some articles use several outputs reflecting the multioutput process in sporting teams, that is, playing different competitions in the same
season (e.g., González-Gómez & Picazo-Tadeo, 2010).
4 Some papers are labelled as “managerial efficiency,” which we defined in this paper as “sporting efficiency” (e.g., Fizel & D’Itri, 1997).
5 In Spain, four clubs are membership-based clubs: Athletic de Bilbao, FC Barcelona, Osasuna, and Real Madrid. They carry out elections
among their members in order to get the presidency of the club. For instance, Joan Laporta won the election for FC Barcelona in 2021.
6 Some clubs are exempted from this rule because it is established that if an investor has supported the club over 20 years, they can control
the club. These are the cases of Bayer with Bayer Leverkussen or Volkswagen with Vfl Wolfsburg. Further details can be found in Sánchez
et al. (2021) and Franck (2010).
7 In the database we are using from English football, there are 50 foreign presidents; 48 of them belong to clubs with a foreign investor
dominance.
8 Transfermarkt provides market values for football players using a crowd-sourced methodology. Some papers have shown that those
values can reasonably be used as proxies for team quality in research (Herm et al., 2014; Peeters, 2018; Coates & Parshakov, 2021).
9 The results using the DEA methodology are in line with those presented in the paper and are available upon request.

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Appendix

Table A1. Evolution in the Number of Foreign-Owned Clubs in European Football

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16

English Premier
15% 15% 20% 30% 50% 45% 45% 45% 50% 55% 55% 55% 60%
League

Ligue 1 5% 5% 0% 5% 5% 20% 10% 5% 5% 5% 15% 15% 15%

Bundesliga 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Serie A 0% 0% 0% 0% 0% 0% 0% 0% 5% 5% 10% 10% 15%

La Liga 0% 0% 5% 0% 0% 0% 5% 10% 10% 5% 5% 10% 10%

EFL Championship 8% 13% 13% 13% 8% 4% 13% 25% 33% 42% 50% 50% 46%

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