UNIVERSITY OF LJUBLJANA SCHOOL OF BUSINESS AND ECONOMICS MASTER’S THESIS PRIVATIZATION OF SPORT ORGANIZATIONS IN (POST)TRANSITION ECONOMIES: THE CASES OF FOOTBALL CLUBS PARTIZAN AND CRVENA ZVEZDA Ljubljana, 2020 ĐORĐE PEROVIĆ AUTHORSHIP STATEMENT The undersigned Đorđe Perović, a student at the University of Ljubljana, School of Economics and Business, (hereafter: SEB LU), author of this written final work of studies with the title “Privatization of sport organizations in (post)transition economies: the cases of football clubs Partizan and Crvena zvezda”, prepared under supervision of prof. dr. 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Ljubljana, 15th July 2020 Author’s signature: _____________________ TABLE OF CONTENTS INTRODUCTION ............................................................................................ ....................... 1 1 HISTORICAL OVERVIEW OF FOOTBALL FROM MANAGERIAL PERSPECTIVE IN THE FORMER YUGOSLAVIA ............................... ....................... 4 1.1 History of the football game between two World Wars ..................... ....................... 5 1.2 History of the football in socialist Yugoslavia............................................................. 5 1.2.1 Political and sociological factors surrounding the football in the SFRY ............ 8 1.2.2 Companies’ sponsorships of sports clubs and athletes in socialism.................... 9 1.3 Dissolution of Yugoslavia and transition period....................................................... 11 1.4 Current situation in football in Serbia ................................................ ..................... 14 2 OWNERSHIP AND FINANCING OF SPORTS ENTITIES ................... ..................... 16 2.1 Legislation surrounding the ownership and financing of sports entities in Serbia - The Sports Act of the Republic of Serbia ........................................... ..................... 16 2.2 Sociological and economic factors surrounding the ownership and financing of sports entities in Serbia ...................................................................... ..................... 19 2.3 Public ownership ................................................................................. ..................... 24 2.4 Public-private (mixed) ownership ....................................................... ..................... 25 2.5 Private ownership ................................................................................ ..................... 26 3 EXAMPLES OF OWNERSHIP STRUCTURE AND PRIVATIZATION PROCESS OF SELECTED SPORTS ENTITIES ...................................................... ..................... 28 3.1 Post-transition economies in the Balkans ........................................... ..................... 28 3.1.1 Ludogorets Razgrad .................................................................. ..................... 28 3.1.2 CFR Cluj .................................................................................. ..................... 29 3.2 Developed market economies .............................................................. ..................... 30 3.2.1 Borussia Dortmund ................................................................... .................... .30 3.2.2 Manchester United .................................................................... ..................... 32 3.3 Successful and unsuccessful examples of change of ownership structure in sports entities in the former Yugoslavia ........................................................ ..................... 33 3.3.1 Unsuccessful example-Basketball Club Split ............................ ..................... 33 3.3.2 Successful example-Basketball Club Hemofarm ....................... ..................... 34 i 3.4 Analysis of ownership structures of selected sports entities ............... ..................... 35 4 PUBLIC FUNDING VS PRIVATIZATION - CASES OF CRVENA ZVEZDA AND PARTIZAN ................................................................................................. ..................... 37 4.1 Benchmark analysis ............................................................................. ..................... 38 4.2 SWOT analysis .................................................................................... ..................... 41 4.3 Polonsky’s stakeholder matrix model. ................................................ ..................... 42 4.4 Analysis of financial statements of Crvena zvezda and Partizan ....... ..................... 45 4.4.1 Vertical analysis of balance sheet of Crvena zvezda and Partizan .. .................... 45 4.4.2 Vertical analysis of income statement of Crvena zvezda and Partizan ................. 46 4.4.3 Liquidity indicators of Crvena zvezda and Partizan ....................... .................... 46 4.4.4 Financial ratios of Crvena zvezda and Partizan .............................. .................... 49 4.4.5 Profitability ratios of Crvena zvezda and Partizan ........................ ..................... 51 4.5 Discussion on results obtained from all of the used analyses ............. .................... 55 CONSCLUSION ............................................................................................... ..................... 59 REFERENCE LIST.......................................................................................... ..................... 60 LIST OF FIGURES Figure 1: Growth in the number of professional football clubs in Yugoslavia (1919-1985) ......... 7 Figure 2: Ownership structure of Borussia Dortmund (as of May 2020) .............. .................... 31 Figure 3: Takeover process of Manchester United’s stocks by the Glazer family between March 2003 and June 2005 .................................................................. ..................... 32 LIST OF TABLES Table 1: Benchmark analysis of Crvena zvezda, Partizan and selected European clubs ............. 39 Table 2: SWOT analysis of Crvena zvezda and Partizan ..................................... ..................... 42 Table 3: Comparison between Serbian football clubs and clubs from Top 5 European leagues based on the Polonsky stakeholder matrix model ................................ ................ 43-44 Table 4: Formulas of liquidity indicators............................................................. ..................... 47 Table 5: General liquidity ratio for the both clubs over three observed years ....... ..................... 47 Table 6: Quick ratio/acid test for the both clubs over three observed years .......... ..................... 48 ii Table 7: Ratio of financial liquidity for the both clubs over three observed years ..................... 49 Table 8: Formulas of financial ratios ......................................................................................... 49 Table 9: D/E ratio for the both clubs over three observed years ................................................. 50 Table 10: Leverage ratio for the both clubs over three observed years ....................................... 51 Table 11: Formulas of profitability ratios .................................................................................. 52 Table 12: Profit margin for the both clubs over three observed years ........................................ 52 Table 13: Return on assets for the both clubs over three observed years .................................... 53 Table 14: Return on equity for the both clubs over