Soft Budget Constraints in French Football through Public Financing of Stadiums

Abstract

Several football stadiums were built or renovated in France for hosting the 2016 UEFA European Football Championship. This study examines to what extent financial support by local governments for stadium construction or renovation induces soft budget constraints (SBC) for professional sports clubs. We address the research question based on a quantitative case study in the context of the construction and renovation of eight football stadiums that took place in France between 2012 and 2016. Our data shows that the public sector financed on average 78% of the new stadiums’ total construction or renovation costs, and local governments paid on average 60% of the total annual rental costs. The results indicate that local governments in French professional football are “supporting organizations” and help to ensure the financial sustainability and viability of the clubs by allowing them to benefit from financial flexibility, which are typical characteristics of SBCs. In total, we identify 32 forms of public aid that we classified according to different categories of “softness” and whether these aids appeared ex ante or ex post. Public aid constituted financial support that was sometimes very substantial, amounting to several million euros in each case. This financial support is often not taken into account by the regulatory authorities and thus could be interpreted as hidden government subsidies to professional clubs, which in some cases exceeded the subsidy allowance of €2.3 million.