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The purpose of this paper is to investigate the impact of scandal on investor valuation of sport by examining changes in share prices of three football clubs involved in…
The purpose of this paper is to investigate the impact of scandal on investor valuation of sport by examining changes in share prices of three football clubs involved in the 2006 Italian “Calciopoli” scandal.
Share price variation and volatility across 2006 is analysed for Juventus (the centre of the scandal), Lazio (also involved) and Roma (uninvolved) over different (qualitatively defined) phases of the scandal. Movements in share price are compared to three benchmark indices – FTSE MIB, DJ Stoxx Europe 600, and DJ Stoxx Europe Football – indexed from 2 Jan 2006. Unadjusted analysis of share price movement matched with events to inform the likely causes of variation.
Despite speculation and high volatility, the share price of all three clubs increased by 30 per cent in 2006, outperforming benchmark indices (15 per cent). This suggests the Calciopoli scandal increased the perceived value of the clubs.
Generalisation of these findings requires more sophisticated statistical and econometric analysis of the Calciopoli scandal, and application of the method to other instances of scandals in sport.
Intuitively, scandals in sport have a negative impact. This paper suggests that scandal could have a positive impact on a club's share price and therefore the overall financial value of sport.
There is a dearth of literature on the economic consequences of scandals in sport. This paper contributes to the development of that literature and investigates some economic consequences of a particular scandal in Italian football.