How do the share prices of football clubs react to new managerial appointments? : An event study of publicly listed Danish football clubs

Abstract: The study sets out to examine whether or not there is an effect on the share price when appointing new managers for football clubs. CEOs and football managers have been compared in terms of responsibilities and while there is a wealth of research on the effect on the share price of appointing a new CEO, there has been little research on the same effect for football managers. With that in mind, the study aims to answer the following research question: How do the share prices of publicly listed Danish football clubs react to managerial appointments? The theoretical framework for the study was based around the efficient market hypothesis, which has been used before in football settings to explain changes in the share price from match outcomes. This study contributes by utilizing the efficient market hypothesis for managerial appointments in the football setting. A quantitative event study was conducted on 5 Danish football clubs listed on the Copenhagen Stock Exchange. In total, between 2003 and 2014 there were 30 managerial appointments. Data were gathered on the dates of announcement, and from that the event study was carried out through multiple regression analysis to gauge whether or not there was a reaction to the appointments. Furthermore, it was tested whether the origin of the manager or the state of the club at the time of announcement had any impact on the share price. Findings showed that there were signs of a positive share price reaction when appointing a new manager. Similarly, signs of a positive share price reaction were also found for clubs that performed badly before the appointment of a new manager. However, these two were not statistically significant. Statistically significant evidence was found for a positive share price reaction when appointing an outsider over an insider as the new manager. This finding supports the efficient market hypothesis in a semi-strong form. Nonetheless, the share price reactions were modest. A reason for the weak positive share price reactions could be due to the lack of efficiency in the Danish football shares, since they appear to be less traded.