Financial Regulation of Professional Football in Ghana Kwame Amoah
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Financial Regulation of Professional Football In Ghana Kwame Amoah Baah-Nuakoh University of Stirling Thesis submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy School of Sport, University of Stirling November, 2013 DECLARATION I declare that this thesis is my own research work carried out in the United Kingdom under the supervision of Dr. Stephen Morrow and Prof. Leigh Robinson of the University of Stirling, Scotland. This thesis has not been submitted in another institution for the award of another degree. References cited in this work have been fully acknowledged. KWAME AMOAH BAAH-NUAKOH 2 Abstract Football clubs have multiple stakeholders sometimes with different and conflicting objectives. If a club concentrates solely on achieving sporting success at the expense of its financial objectives, it risks jeopardizing its long-term stability, which may affect the sporting integrity of the league as a whole. The behaviour of one club potentially has externality implications for other stakeholders which cannot always be internalised. There is therefore the need for regulation of the pre-emptive type to avert such negative consequences for clubs. FIFA has requested all member associations to implement club licensing to improve upon professionalism in management and to ensure long-term stability of club football. This thesis picks up on this theme to review the financial regulatory system in Ghana, obtain lessons from other jurisdictions and develop an incentive-based context-specific Football Financial Clearinghouse framework that is applicable in Ghana. The thesis employs a mixed-method research approach to evaluate the financial disclosure, position and performance of professional football clubs in Ghana, utilising critical reviews, interviews, focus group discussions and questionnaires to answer specific research questions. The empirical analysis in this thesis shows that financial licensing and monitoring needs to be complemented by the provision of incentives and support services to clubs to achieve optimal regulatory compliance. The key incentive in the specific case of Ghana is to ensure regulated access to credit. This thesis makes four significant contributions to knowledge by showing that: Ghanaian football clubs are in a difficult financial situation; there is an appetite for change amongst Ghanaian football’s stakeholders for a new financial regulatory framework; the existing financial regulatory frameworks, especially in Europe, are not applicable in the Ghanaian context as they were made for a different jurisdiction; and that the FFC framework would be an appropriate context-specific framework to deal with the financial regulation of Ghanaian football clubs. 3 Acknowledgements I would like to thank my supervisors Stephen Morrow and Prof Leigh Robinson, both of the School of Sports, University of Stirling for overseeing this thesis from its conception. Their contributions, comments and critique throughout this project have proved invaluable. I would also like to thank Prof David Lavallee for the part he played in getting me enrolled on the PhD program. My thanks also go to Miss Henrietta Owusu-Banahene for proof-reading the thesis, and to my flatmate, Dr Patrick Ofori, for his support. I would especially like to thank Dr K. K. Sarpong of Finatec (Gh.) for his outstanding contribution to this PhD project. His support has kept me going and I cannot really appreciate his help enough. To him, my wife Lilly and the three kids – AJ, Naana and Joojo – I dedicate this thesis. All of them have made immense sacrifices for me to complete this thesis. 4 Contents Page List of Tables, Figures and Appendices CHAPTER I: INTRODUCTION 1.1 The Research Context 20 1.1.1 The Country, the Economy and its Politics 20 1.1.2 Politics and Football in Ghana 22 1.1.3 Governance Structures in Ghanaian Football 25 1.1.4 Ghanaian Football’s Achievements 29 1.1.5 Ghanaian Football’s Business Environment 29 1.2 The Research Aims and Objectives 35 1.3 Importance and Contributions of the Study 39 1.4 Organisation of the Thesis 41 CHAPTER II: PRINCIPLES OF REGULATORY DESIGN: THE SAPPINGTON MODEL 2.1 Introduction 43 2.1.1 Focus of Research on Regulation 44 2.1.2 What is Regulation? 48 2.1.3 Sappington’s Principles of Regulatory Design: 50 An Overview 2.2 The Objectives and Function of Regulation 52 2.3 The Resources, Independence of Regulator and 58 Regulatory Capture 2.4 The Role of Institutional Environment on Regulatory Design 64 2.5 Industry Conditions and Regulation 68 2.6 The Scope and Form of Regulation 73 2.6.1 Principles versus Rules-Based Standards 77 2.6.2 Enforcement of Regulation 78 5 2.6.3 Regulatory Enforcement Models 80 2.6.4 The Role of Incentives in Regulatory Compliance 84 2.6.5 Strategic Use of Regulation 85 2.7 Conclusions 87 CHAPTER III: RESEARCH METHODOLOGY AND METHODS 3.1 Introduction 90 3.2 Ontological and Epistemological Considerations 90 3.2.1 Positivism versus Interpretivism 90 3.2.2 A Pragmatic Approach to Research 92 3.3 Methodological Approaches to this Study 94 3.3.1 Quantitative versus Qualitative Approach to Social 94 Research 3.3.2 The Choice of a Mixed Method Approach to the Study 95 3.3.3 Mixed-Method Type Adopted for the Study 99 3.4 Application of Qualitative Methods 103 3.4.1 Selection of Specific Data Gathering Methods 103 3.4.2 Ethical Considerations for Primary Data Collection 112 3.4.3 Dealing with Interview Data 113 3.4.4 Limitations of Qualitative Methods 119 3.5 Application of Quantitative Methods 124 3.5.1 Financial Performance and Position of Clubs 124 3.5.2 Transcript Validation Questionnaire 126 3.6 Summary 127 6 CHAPTER IV: EXISTING FRAMEWORKS OF FOOTBALL REGULATION – A CRITICAL REVIEW 4.1 Introduction 129 4.1.1 Regulations Reviewed 129 4.1.2 Sappington’s Framework as the Basis of the Review 132 4.2 Objectives of Regulator 134 4.2.1 Industry Development and Investment 136 4.2.2 Safe and Quality Service 137 4.2.3 Equitable Outcomes 138 4.2.4 Limiting the Earnings of Producers 140 4.2.5 Promote Least Cost Production 141 4.2.6 Achieve Desired Levels of Consumption 142 4.3 Institutional Structure 143 4.3.1 Delegation of Responsibility 143 4.3.2 Decision Making Bodies for Club Licensing 145 4.3.3 Commitment Ability of Regulator 146 4.4 Resources and Independence of Regulator 149 4.4.1 Quality of Human Resources 149 4.4.2 License Administration 151 4.4.3 Mode of Membership Formation 152 4.5 Industry Conditions 153 4.6 Scope, Function and Form of Regulation 157 4.6.1 The Scope of Regulation 157 4.6.2 The Function of the Regulation 159 4.6.3 The Form of the Regulation 166 4.7 Summary and Conclusions 171 4.7.1 Summary 171 4.7.2 Conclusions 173 CHAPTER V: REVIEW OF GHANAIAN FOOTBALL FINANCE 5.1 Introduction 175 5.2 Quality of Financial Reporting by Ghanaian 176 7 Professional Clubs 5.2.1 Submission and Storage of Accounts 176 5.2.2 Credibility of Accounts 179 5.2.3 Content of Accounts 180 5.2.4 Consistency in Accounting 188 5.2.5 Comparability 189 5.3 Financial Performance and Position of Ghanaian 195 Professional Clubs 5.3.1 Revenue 195 5.3.2 Expenditure 204 5.3.3 Profitability 207 5.3.4 Financial Position 209 5.4 Financial Analysis of Ghanaian Professional Clubs 218 5.4.1 Cash Management 218 5.4.2 Profit Management 224 5.5 Other Issues Affecting Financial Management of Clubs 227 5.5.1 Utilisation of Formal Sector Credit 227 5.5.2 Sponsorship and Media Rights 229 5.5.3 Merchandising 232 5.5.5 Financial effects of Participating in CAF 233 Inter-Club Competitions 5.6 Analysis and Conclusions 239 5.6.1 Financial Disclosure 239 5.6.2 Financial Performance 242 5.6.3 Financial Management of Clubs 247 5.6.4 Conclusions 249 8 CHAPTER VI: THE FOOTBALL FINANCIAL CLEARINGHOUSE: A CONCEPTUAL FRAMEWORK 6.1 Introduction 249 6.2 The Concept of a Clearing-house 254 6.2.1 Clearing-houses in Economics and Finance 255 6.2.2 Clearing-houses in the Arts and Sciences 256 6.2.3 The Player Draft System in US Sports as a 257 Clearing-house 6.2.4 The FIFA Transfer Matching System (TMS) 258 6.2.5 Summary 260 6.3 Determinants of Scope, Function and Form of the 261 FFC Regulatory Framework 6.3.1 The Objectives of the Regulator 261 6.3.2 Resources and Independence of Regulator 263 6.3.3 Industry Conditions and Institutional Structure 264 6.4 The Form and Scope of the FFC Clearing-house 265 6.4.1 Composition of the Clearing-house 265 6.4.2 Independence of the FFC Board 267 6.5 Functions of the FFC Framework 269 6.5.1 Licensing Clubs for Improved Financial Management 271 6.5.2 Providing Incentives for Compliance 274 6.5.3 Providing Financial Advisory Services to Clubs 277 6.5.4 Monitoring Financial Activities of Clubs 280 6.6 Conclusions 281 9 CHAPTER VII: THE FFC FRAMEWORK AND FINANCIAL REGULATION IN GHANA FOOTBALL 7.1 Introduction 283 7.2 Rationale for Regulation 284 7.3 Financial Disclosure and Licensing 288 7.3.1 Quality of Existing Regulation 288 7.3.2 Submission of Financial Statements 291 7.3.3 Review of Financial Statements 295 7.3.4 Accounting and Auditing Standards 300 7.3.5 The FFC Framework and Financial Disclosure 305 7.3.6 Summary 309 7.4 Regulated Access to Funding 310 7.4.1 Funding from Financial Institutions and Government 310 7.4.2 Access to Government Funding 316 7.4.3 The Player Transfer Payment System 321 7.4.4 Summary 325 7.5 Financial Capacity Building and Policy Advocacy 326 7.5.1 Financial Capacity within Clubs 326 7.5.2 Policy Advocacy within the FFC Framework 329 7.5.3 Summary 330 7.6 Interrogation of FFC Framework 331 7.6.1 General Impressions 331 7.6.2 Form of the FFC