Contributions published at Strategic Management and Business Policy (Egon Franck)

We test the realization effect, i.e., that risk-taking is greater after paper outcomes than after realized outcomes, using gambling data from a real casino. During a particular casino visit, customers likely perceive that gains and losses are paper outcomes, whereas leaving the casino realizes the final account balance. Using individual-level slot machine gambling records, we find that risk-taking after both paper losses and paper gains increases within a visit and that this effect is more pronounced for larger outcomes. Conversely, realized losses from earlier visits significantly decrease risk-taking if losses are comparatively large, whereas comparatively small realized losses and realized gains do not alter risk-taking. These results provide important field validation of the realization effect in an environment with positively skewed lotteries.

This paper examines whether sports betting markets are semi-strong form efficient—i.e., whether new information is rapidly and completely incorporated into betting prices. We use news on ghost games in the top European football leagues due to the COVID-19 pandemic as a clean arrival of new public information. Because spectators are absent during ghost games, the home advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers and betting exchanges systematically overestimated a home team’s winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semi-strong form efficient. Examining different leagues, we find that our main results are driven by the German Bundesliga, which was the first league to resume operations. We exploit a betting strategy that yields a positive net payoff over more than one month.

This paper examines whether individuals’ decision making is affected by fast-sounding horse names in a betting exchange market environment. In horse racing, the name of a horse does not depend on the horse's performance and is thus uninformative. If positive affect towards fast-sounding horse names is present, we expect less accurate prices, i.e., winning probabilities, and lower returns due to the increased demand for these bets. Using over 3 million horse bets, we find evidence that the winning probabilities of bets on horses with fast-sounding names are overstated, which impairs the prediction accuracy of such bets. This finding implies that prices in betting exchange markets are distorted by incorporating affective, misleading information from a horse's fast-sounding name. Consequently, this bias translates into significantly lower betting returns for horses with names classified as fast-sounding compared to the returns for all other horses.

In the past European club football provided a textbook example of the “soft budget constraints phenomenon” initially described by Janos Kornai. As a remedy UEFA introduced the Club Licensing and Financial Fair Play Regulations (FFP). The Break-Even Requirement and the Fair Market Value Principle were the main elements of these regulations since their introduction in 2009 and first application in 2012. In 2015 the new concept of Voluntary Agreements was added. Which is the presumed rationale behind this major amendment of the rules? After analyzing the effects of The Break-Even Requirement and the Fair Market Value Principle, we propose that the new concept of Voluntary Agreements makes FFP less vulnerable to the allegation that it discriminates against true entrepreneurs wishing to develop mismanaged football clubs into sustainable businesses. Voluntary Agreements give such entrepreneurs more flexibility to invest, which would be of particular importance in environments where quality is only slowly remunerated by the football markets. The fact that not a single Voluntary Agreement has been signed until January 2020 is hard to reconcile with the allegation of discrimination.

The decision to dismiss a coach is challenging because poor performance tends to coincide with both bad luck and low coaching ability. We differentiate between dismissals following actual poor performance on the pitch (wise dismissals) and dismissals following seemingly poor performance due to bad luck (unwise dismissals). To categorize dismissals, we use “expected goals,” which are less vulnerable to random variation in match outcomes. Using data from European football, we find that wise dismissals increase subsequent performance compared to a control group of nondismissals with similarly poor performance on the pitch. However, unwise dismissals do not improve subsequent performance compared to a control group with similar strings of bad luck.

In dynamic contests, strategic momentum and psychological momentum potentially coexist, which makes it difficult to distinguish between the two. We employ the setting of professional tennis, which allows us to separate psychological from strategic momentum. In tennis, converting a break point potentially triggers both strategic momentum - due to a change in the relative position of the players - and psychological momentum - due to a change in the perception of the players. To distinguish between these two momentum types, we employ exogenously given interruptions. Interruptions are predicted to affect psychological momentum negatively, while leaving strategic momentum unaffected. Using 4930 game-by-game observations from 141 Grand Slam men’s single matches, we show that the breaking players’ probability of winning a game increases after converting a break point, which provides evidence for momentum. Moreover, we show that this momentum effect is negatively affected by an interruption. Thus, psychological momentum seems to be the main trigger leading to a performance increase after a converted break point.

We examine whether the moment just before the half-time break is a particularly good time to score a goal. Using detailed data from the top five European football leagues between the 2013-2014 and 2017-2018 seasons, we exploit the quasi-random occurrence of goals scored just before and just after the half-time break. In the former situation, the game is exogenously interrupted by a break immediately after the goal, whereas in the latter situation, the game continues without interruption. We show that in the case of a goal being scored just before halftime, the scoring team benefits more from the half-time break than the conceding team.

In European club football, decision makers often rely on recent match outcomes when evaluating team performance, even though short-term results are heavily influenced by randomness. This can lead to systematic misjudgments. In this article, we propose a complementary approach for performance evaluation. We build upon the concept of expected goals based on quantified scoring chances and develop a chart that visualizes situations in which a team’s true performance likely deviates from the performance indicated by match outcomes. This should prevent clubs from making flawed decisions when match outcomes are misleading due to the influence of random forces.

This paper tests the house money effect, i.e., that prior gains increase subsequent risk-taking behavior, in the field. We use individual-level slot machine gambling records of 5,169 players from a real casino and employ jackpot hits as exogenous house money shocks. Our results show that players wager significantly less money after hitting a jackpot, which implies that players reduce their risk-taking behavior and thus act more cautiously after experiencing gains. We fail to replicate the house money effect in the field and find evidence for a reverse house money effect. Furthermore, while risk-taking behavior is reduced after hitting a jackpot, the jackpot size has no additional effect.

UEFA's Club Licensing and Financial Fair Play Regulations (FFP) have impacted European club football. After five distinct applications of the break-even requirement, which represents the cornerstone of these regulations, it is time for an assessment. How has the situation in European top-division football changed since the FFP regulation? The most recent financial data show that European club football is characterized by significant financial recovery and further polarization. How has the FFP regulation presumably affected this development? This article discusses plausible reasons why FFP has contributed to financial recovery but has not aggravated polarization. Understanding the drivers of polarization is essential before taking further regulatory steps.

We examine how the presence of fast traders impacts price discovery and efficiency in a real-world setting, i.e., courtsiding, the activity of live betting from a tennis stadium. This setting allows us to isolate the activity of fast-acting traders who have a short-term monopolistic access to important information with respect to other traders who trade based on delayed TV images. Using live-tennis betting data combined with detailed point-by-point match data, our results show that courtsider trading promotes quick price discovery and correctly incorporates new information into prices. We estimate that a simple trading strategy yields a positive trading return to fast traders after the occurrence of important informational events.

Even though betting exchanges are considered to be the superior business model in the betting industry due to less operational risk and lower information costs, bookmakers continue to be successful.We explain the puzzling coexistence of these two market structures with the advantage of guaranteed liquidity in the bookmaker market. Using matched panel data of over 1.8 million bookmaker and bettingexchange odds for 17,410 soccer matches played worldwide, we find that the bookmaker offers higherodds and bettor returns than the betting exchange when liquidity at the betting exchange is low.

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This project is aimed to analyse the phenomenon of Third Party Ownership (TPO) in relation to three of the principal stakeholders in professional football: football clubs, external investors and governing bodies. What has been done in the research is to study different sources: indeed, we develop a work that suggests some possible conditions and measures that allow us to understand if it is possible to find a better solution to the dispute around this practice. We will try to achieve all this through the combination between recent and existing literature, economic and legal reports, personal opinions as well as a scientific approach based on a qualitative analysis with various experts having different background and positions linked to football. Indeed, the aim of the project is to develop and evaluate some strategic options to adopt for football clubs (in the long and in the short-term), for external investors and for governing bodies in order to comprehend if a future reintegration of TPO (or other similar forms of clubs’ funding) into the world of football after the FIFA’s ban on the practice make sense or not. What has been found is that there is a current need to redefine the whole transfers system in football (and not the TPO problematic only), fostering transparency at every level and allowing little/medium-sized football clubs to rely on external sources of money in order to respond to the increasing financial needs of managing a team. In this sense, a new regulatory framework as a base of a future football business model would be possibile under certain conditions, which have to be adopted and followed by the three main stakeholders analyzed in our research. The role of investors in football has changed during the last years and they are currently developping new alternative methods of clubs’ funding. The governing bodies (together with all the other agents linked to TPO) has to descover balanced solutions in order to regulate the “third finance” and find out alternative solutions which could better protect the autonomy of football clubs, not hampering them to make use of important financial tools such as TPO.