Did UEFA’s financial fair play harm competition in European football leagues?

When introducing UEFA’s Financial Fair Play (FFP) it was argued that as a beneficial side effect competition in European football leagues should become more equilibrated and perceived as being fairer. Based on a hand-collected dataset on league results, player market values as well as investor payments of more than 300 European football clubs, we scrutinize the impact of FFP on the competitive landscape in major European football leagues. By applying a fixed-effect panel regression difference-in-differences approach, we find results that are consistent with the view that FFP might have further amplified the competitive imbalance. This might be caused by the fact that FFP raises some barriers against the entrance of new investors. Moreover, we present evidence that FFP supports the former season’s winner in terms of budget shares in the upcoming season. Overall, our results support the view that FFP turns European football leagues less equilibrated and even tends to freeze current hierarchies.