The main purpose of this paper is to examine the relationship between human capital investments and financial performance in the professional football industry. The authors examine this association by controlling for internal (club-level) mechanisms of governance. Specifically, as they deal with a context of highly concentrated ownership and familial control of football clubs, they posit that the degree of family board representation and a dual leadership structure exert a moderating effect on the decision to spend on playing talent.
The empirical analysis employs a fixed-effect econometric model on a panel data set of 16 Italian football clubs that spans a nine-year time period ending up with 144 firm-year observations.
The main novel finding of this investigation is that clubs with CEO duality and a high degree of family board representation manage to profit from investments in player contracts as opposed to clubs which lack these governance mechanisms.
A clear implication is that the presence of corporate governance mechanisms at club level may be value-enhancing. In terms of policy direction, the finding makes the case that regulatory bodies should consider the imposition of governance mechanisms at club level as a means to promote actual financial discipline and a further ally to current regulations that are restricted to monitoring processes tied to accounting data.
This study attempts to explain the financial outcomes of player investments by combining insights from the mainstream governance and family business literature. Prior works in the field are restricted to testing the direct relation between player investments and performance, but fail to consider the potential moderators of this association.
