IJSF Issue 1:2

Contents for IJSF Issue 1:2

Executive Interview: Randy Vataha
Authors: Daniel Rascher
Abstract:An interview with Randy E. Vataha, President of Game Plan LLC, Investment Banking and Consulting Firm

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The Edifice Complex: The Economics of Public Subsidization of Major League Baseball Facilities
Authors: Jahn K. Hakes, Christopher M. Clapp
Abstract:Using a panel of Major League Baseball team attendance data for the period 1950 to 2003, the authors determined that after controlling for team quality and other factors, a new modern era ballpark adds 22 to 30 percent to total attendance over a 10-year period and, on average, generated present-value stadium revenues of $272 million for the franchise. Since the construction costs for the group of 14 modern ballparks averaged $99 million in private money and $198 million in public funds, there were two results with important implications for public finance. First, the revenue estimates were less than the typical cost of most modern stadiums, indicating that the projects generated positive rents for team owners only due to public subsidization. Second, the ratio of recipient benefits to subsidy expenses indicated that public spending on construction of replacement stadiums was a less effective method for subsidizing franchise owners than direct lump-sum payments. Furthermore, the preference for stadium project subsidies over cash subsidies can not be explained by the desire of local officials to improve the quality-of-play of the team. Due to non-complementarity between new stadiums and team success, team profits are maximized when an owner “pockets?increases in revenue rather than reinvesting in the team’s level of on-field quality.

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Impression Management in Football Club Financial Reporting
Authors: Stephen Morrow
Abstract:The paper investigates the selection of accounting policies for intangible assets in the Italian football industry, focusing on the effects of the so-called salva calcio decree. Introduced by the Italian government, the decree effectively permitted clubs to amortize the asset of players?registration rights over an arbitrary time period of 10 years rather than over the length of players?contracts, thus improving clubs?reported financial position and performance. While adoption of the salva calcio decree had no direct cash flow effect, it had indirect economic consequences. It is argued that adoption of this policy by some Italian clubs was motivated by a form of legitimacy theory, whereby clubs sought to legitimize their financial position and performance with a view to meeting the licensing demands of football governing bodies. It also highlights the difficulty stakeholders face when trying to understand a football club’s financial results. Far from being neutral, figures in financial statements are value-laden.

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The Use of Public Funds for Private Benefit: An Examination of the Relationship Between Public Stadium Funding and Ticket Prices in the National Football League
Authors: Matthew T. Brown, Daniel A. Rascher, Wesley M. Ward
Abstract:During the past decade there has been a proliferation of sports stadia being built in America’s municipal districts. While it used to be common for the public to fully fund stadium construction projects, over the past 20 years factors such as political motives, tax reform, and increased public awareness of tax equity have forced sports teams to share increasing amounts of the financial burden (Crompton, Howard, & Var, 2003). As public funding for stadia construction has decreased, franchises have continued to strive for maximized profits. Concurrently, the cost of attending events in sports stadia has increased for consumers in terms of higher ticket prices even though changes in fixed costs should not affect pricing (Leeds & von Allmen, 2004).

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The Relationship Between Big-Time College Football and State Appropriations for Higher Education
Authors: Brad R. Humphreys
Abstract:Do big-time college sports affect state appropriations to public colleges and universities? Little attention has been given to the possibility that big-time athletic programs generate economic benefits for a university at the state capital. The paper estimates a reduced form model of the determination of annual state appropriations to public universities, including institution-specific effects to control for unobservable factors like mission and reputation that could affect appropriations. The results suggest that institutions fielding Division I-A football programs receive 8% more in annual state appropriations — about $2.6 million in real 1982 dollars — than those without such programs. Bowl appearances and national rankings do not lead to additional appropriations. These results suggest that the total economic benefit associated with big-time athletic programs may be larger than previously thought and provide insight into why the number of institutions fielding Division I-A college football programs increased by 10% from 1998 to 2002.

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Book Review: From the Ballfield to the Boardroom: Management Lessons from Sports
Authors: Michael D. Raycraft
Abstract:A book review of From the Ballfield to the Boardroom: Management Lessons from Sports, by Brian Goff

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