The Conceptual Framework for Achieving Financial Self-Sustenance in Sports

Abstract

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Although considerable research has been devoted to measuring the financial value of sports entities, somewhat less attention has been paid to assessing the extent to which the different finance models followed by sports entities expose them to the risk of financial failure. As a consequence, the current study sought to determine the extent to which sports entities operating under different finance models are exposed to the risk of financial failure. Document analysis, involving the analysis of published financial statements from 100 purposively sampled sports entities drawn from four continents, and three focus group discussions were used to gather data for the study. The NVivo 12 software was used to classify the data into four thematic categories based on the participant entities’ degree of financial self-sustenance. The findings were used to construct the conceptual framework for achieving sports financial self-sustenance. The framework ranks sports entities into a four-level hierarchy, according to the extent to which they are exposed to the risk of financial failure. It shows that it is unhealthy for sports entities to spend beyond the revenue they generate from their core operating and commercial activities, and provides guidelines on how sports entities can reduce the risk of financial failure and achieve ‘sports financial self-sustenance’ by implementing financial strategies which allow them to improve their revenue generating capacities and contain sports expenditure within their own sports revenues. The paper introduces new concepts that have not been explicitly discussed previously in the literature pertaining to sports finance.

Keywords: Sports Financial Self-Sustenance, Financial Red Zone, Low Revenue Financial Amber Zone, High Expenditure Financial Amber Zone, Financial Green Zone, Sports Revenue, Non-Sports Revenue

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