IJSF 14:4

Abstract:International Journal of Sport Finance, Volume 14, No.4, November 2019.

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Stock Market Reaction to Mega-Sport Events: Evidence from South Africa and Morocco
Authors: Thabo J. Gopane and Reggy M. Mmotla
Abstract:This paper investigates the domestic stock market reaction to the announcement of South Africa winning the bid to host the 1995 Rugby World Cup, 2003 Cricket World Cup, and 2010 FIFA World Cup as well as Morocco concurrently losing the hosting competition for the 2010 FIFA World Cup. We used Event Study and EGARCH models. For Event Study, we evaluated normal market performance using 250 daily stock returns, while abnormal returns were tested within a 41-day (-20, +20) event window. The test was replicated using 2,227 daily compounded stock returns for the EGARCH model. Based on both the Event Study and EGARCH models, our findings show that the stock market responded positively to the hosting of mega-sport events for the bid winner (South Africa) and reacted negatively to the bid loser (Morocco). The results are statistically significant at conventional test levels. The findings support policy decisions that welcome mega-sport events.

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Ratcheting Up: Adjusting the Incentives in the NBA Draft
Authors: Barbara Arel and Michael J. Tomas III
Abstract:In this paper, we develop a modified salary scale for NBA rookies that adjusts player financial incentives to enter the draft early. Our proposed “ratcheting” salary schedule pays different salary amounts depending on draft pick and the number of years the player delayed entry to the draft to alter the financial incentives of declaring early. We analyze this proposed new salary scale using a put option analogy to determine early exercise boundary positions in which there is no value in the option to delay entry into the draft. The results show that under a ratchet salary system the incentives for early entry to the draft can be greatly altered, especially for freshmen and sophomores unless they are expected to be lottery picks. This information may help players make better decisions of when to enter the draft and can address unraveling in the NBA labor market.

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A Prediction Model for Bankruptcy of Football Clubs: The French Case
Authors: Yann Carin
Abstract:European football in general, and French football in particular, is experiencing huge financial difficulties and insolvencies. This paper analyses the bankruptcy of French football clubs between the 2008/09 and 2015/16 seasons. Various prediction models were used over the period 2008/09 and 2013/14 to create a model applied to French football and to provide regulatory bodies with an additional tool that could be used to evaluate clubs. A validation test was made on the 2014/15 and 2015/16 seasons. This paper shows that a prediction model for bankruptcy cannot be generalized to apply to all French football clubs. It also shows that the use of a revised version of Altman’s model is applicable to French football clubs. Finally, a new bankruptcy prediction model allows us to obtain better results. The evolution of the score over time is an important signal to identify and anticipate the financial deterioration of a club.

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The Effect of Investment in European Football on the Market Value of Chinese Corporations
Authors: Yangyang Chen, Helmut M. Dietl, Johannes Orlowski and Fang Zheng
Abstract:This paper analyzes how investments in professional European football clubs affect the market value of Chinese corporations. Twelve acquisition cases with complete stock return data are identified between 2009 and 2017. Applying traditional financial event study methodology, it appears that Chinese corporations, on average, do not earn abnormal returns as a result of their investments in professional European football clubs. However, as exceptions to this finding, a few corporations show significant positive or negative abnormal returns. This study also hints at an association between the change in market value of acquiring corporations, the relative transaction size, and their industry relatedness. These findings have important implications for corporate and football managers, current stock holders, and future investors.

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Nonprofit Pricing: Determinants of Membership Fee Levels in Nonprofit Sports Clubs in Germany
Authors: Svenja Feiler, Pamela Wicker and Christoph Breuer
Abstract:In Germany, membership fees in nonprofit sports clubs are comparatively lower than fees or prices for other leisure time activities, such as sports offers from fitness clubs, music schools, or theatre visits. However, it is unclear on which basis sports clubs set their membership fees for different groups and why fees differ between clubs. Based on panel data of nonprofit sports clubs in Germany (n=1,538), this study investigates which factors influence the setting of membership fee levels using classical pricing-approaches adapted to the nonprofit context. The results show that costs related to coaches and instructors as well as facility costs significantly determine the level of membership fees, where-as perceived competition does not. Moreover, club goals such as offering competitive sports or sports for socially vulnerable groups have an impact on the level of membership fees. Furthermore, clubs with higher revenue diversification display lower levels of membership fees two years later.

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