Valuation methods for professional sports clubs: A historical review, a model development, and the application to Japanese football clubs

In the trend towards the globalization of football and the increasing commercialization of professional football clubs, a methodology for calculating the firm value of clubs in non-western countries has yet to be established. This study reviews the valuation methods for the club firm values in Europe and North America and how values are calculated at the time of changing ownership of Japanese clubs and develops regression models with higher explanatory power than before to estimate the more accurate firm value of Japanese football clubs. A review of the existing literature on methods for calculating the firm value of professional sports clubs in Europe and North America, as well as financial statements and registers relating to changes of ownership of Japanese clubs, was conducted. After that, multiple regression analyses were conducted using the firm value of European clubs as the explained variable. From the literature review and the Japanese case studies, it has become clear that European clubs' standard valuation methods are based on revenue and other factors, while in Japan, valuation is based solely on the par value of stocks or net assets. Multiple regression analysis revealed that the firm value of European clubs over the past three years is best explained by revenue or player market value and the number of SNS followers. Two models with high explanatory power were developed. The estimated firm value using the revenue-based formula was higher than the one based on player market value. However, in the J.League, the former was more than three times higher than the latter, while the former was only 1.2 times higher for European clubs. The discrepancy relates to differences in European and J.League clubs' revenues and asset structures. In either formula, the firm value of J.League clubs exceeded the actual transaction price when the change of ownership occurred in the past.