FINANCIAL FOULS? EARNINGS MANAGEMENT IN THE GREEK SPORTS INDUSTRY
DOI:
https://doi.org/10.35774/jee2024.04.581Keywords:
earnings management, Greek sport clubs, accrual method, performance matched model.Abstract
This study investigates the phenomenon of earnings management within Greek sports clubs, a sector with substantial popularity and a strong fan base in Greece, as in many other countries. National sports competitions represent a major industry, involving significant financial investments in marketing, athlete salaries, and organizational expenditures. In recent years, UEFA has imposed financial oversight on these clubs to ensure compliance with Financial Fair Play (FFP) regulations. This research examines a sample of 35 Greek sports clubs competing in the two highest professional leagues from 2006 to 2019, resulting in an un balanced panel dataset with 225 annual observations. To identify earnings management practices, we apply the accrual-based approach, utilizing the performance-matched model as modified by Kothari (2005). Our findings indicate strong evidence that, during the financial crisis period, Greek sports clubs employed earnings management techniques, likely as a response to UEFA’s FFP regulations and to navigate financial challenges.
JEL: M40, M41.
References
Bellas, A., Kontogeorga, G., Thanasas, G. L., Papadatos, K., & Goulas, D. G. (2010, August 25–27). Deviations of budgetary data and outcomes of the first-degree local authorities: The case of the local authorities in the prefecture of Achaia for the period 2005 to 2007 [Paper presentation]. 3rd International Conference on Accounting and Finance, Skiathos Isl., Greece. http://ssrn.com/abstract=1684261
Jaggi, B., & Lee, P. (2002). Earnings management response to debt covenant violations and debt restructuring. Journal of Accounting, Auditing & Finance, 17(4), 295-324. https://doi.org/10.1177/0148558X0201700402
Brooks, M. (2012, November 30). The effects of the UEFA Financial Fair Play Regulation on earnings management in the European football industry. University of Nevada. SSRN. http://dx.doi.org/10.2139/ssrn.2280661
Budzinski, O. (2014). The competition economics of Financial Fair Play (Ilmenau Economics Discussion Papers No. 85). Technische Universität Ilmenau, Institut für Volkswirtschaftslehre, Ilmenau. https://www.econstor.eu/bitstream/ 10419/94196/1/78123770X.pdf
Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126. https://doi.org/10.1016/S0165-4101(97)00017-7
Carter, M. E., & Lynch, L. J. (2012). Compensation committee attributes and the treatment of earnings management in bonuses [Working Paper]. https://feweb.uvt.nl/pdf/2012/springcamp/carter.pdf
Copeland, R. M. (1968). Income smoothing. Journal of Accounting Research, 6, 101-106. https://doi.org/10.2307/2490073
Dimitropoulos, P. (2016). Audit selection in the European football industry under Union of European football associations financial fair play. International Journal of Economics and Financial Issues, 6(3), 901-906. https://www.econjournals.com/index.php/ijefi/article/view/2229
Franck, E. P. (2014, April 30). Financial fair play in European club football - What is it all about? (UZH Business Working Paper No. 328). University of Zurich, Department of Business Administration. http://dx.doi.org/10.2139/ ssrn.2284615
Fischer, M., & Rosenzweig, K. (1995). Attitudes of students and accounting practitioners concerning the ethical acceptability of earnings management. Journal of Business Ethics, 14, 433–444. https://doi.org/10.1007/BF00872085
Habib, A., Bhuiyan, B. U., & Islam, A. (2013). Financial distress, earnings management, and market pricing of accruals during the global financial crisis. Managerial Finance, 39(2), 155-180. https://doi.org/10.1108/03074351311294007
House of Commons. (2010). Report on football governance. Seventh Report of Session 2010-12. Culture, Media and Sport Committee. https://publications.parliament.uk/ pa/cm201012/cmselect/cmcumeds/792/792i.pdf
Jackson, S. B., & Liu, X. K. (2010). The allowance for uncollectible accounts, conservatism, and earnings management. Journal of Accounting Research, 48(3), 565-601. http://www.jstor.org/stable/40784866
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228. https://doi.org/10.2307/2491047
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance-matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163–197. https://doi.org/10.1016/j.jacceco.2004.11.002
Koutoupis, A., Davidopoulos, L. G., Thanasas, G. L., Smaraidos, V., & Kontogeorga, G. Ν. (2024). Earnings management for tax purposes: How do the Greek financially distressed firms react? Journal of Accounting and Taxation, 16(4), 204-216. https://doi.org/10.5897/JAT2022.0554
Lago, U., Simmons, R., & Szymanski, S. (2006). The financial crisis in European football: An introduction. Journal of Sports Economics, 7(1), 3-12. https://doi.org/10.1177/1527002505282871
Persakis, A., & Iatridis, G. E. (2015). Earnings quality under financial crisis: A global perspective. Journal of Multinational Financial Management, 30(C), 1-35. https://doi.org/ 10.1016/j.mulfin.2014.12.002
Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91-102.
Thanasas, G. L., & Smaraidos, V. S. (2017). Creative accounting in Greek football clubs. Journal of European Economy, 16(3), 365-374. https://doi.org/ 10.35774/jee2017.03.365
Xie, B., Davidson, W. N., & DaDalt, P. J. (2003). Earnings management and corporate governance: The roles of the board and the audit committee. Journal of Corporate Finance, 9(3), 295–316. https://doi.org/10.1016/S0929- 1199(02)00006-8
Received: November 10, 2024.
Reviewed: November 16, 2024.
Accepted: November 25, 2024.
Downloads
Published
How to Cite
Issue
Section
License
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
