Researcher ORCID Identifier

0009-0004-7273-1213

Graduation Year

2026

Date of Submission

4-2026

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Richard Burdekin

Rights Information

2026 Chase J Cioe

Abstract

This thesis examines whether salary caps affect the valuation of professional sports franchises in the NBA, NFL, and MLB over the 2003–2024 period. Amid ongoing debate over whether salary caps create financial value or simply redistribute it, this study asks whether capped leagues command a valuation premium relative to uncapped leagues. Using a balanced panel of 92 teams and 2,024 observations, the analysis employs random effects, league fixed effects, system GMM, and three natural experiments to identify the cap premium. The primary dependent variable is the year-over-year log growth in franchise value, d.ln(FV) = ln(FVt/FVt-1), which is stationary by design (IPS test, p = 0.0000). Results show that cap league franchises appreciate approximately 12–17% faster annually than MLB franchises, the NFL hard cap premium is +14.0%*** and the NBA soft cap premium is +11.9%*** in the random effects specification, rising to +17.1%*** and +14.0%*** respectively in System GMM. The NFL's 2010 uncapped season provides the strongest causal evidence: value growth was 13.6 percentage points lower in the one season without a cap. The hypothesized mechanism, that caps reduce payroll volatility which then raises valuations, is not supported. Competitive balance analysis reveals that, contrary to conventional wisdom, capped leagues are significantly less balanced than MLB across all three measures tested. These findings suggest that the valuation premium operates through institutional stability and coordinated revenue sharing structures that accompany cap systems, rather than competitive balance itself, highlighting what investors ultimately value in professional sports franchises.

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