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Investment and Capital Structure of Partially Private Regulated Firms

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  • Carlo Cambini
  • Yossi Spiegel

Abstract

We develop a model that examines the capital structure and investment decisions of regulated firms in a setting that incorporates two key institutional features of the public utilities sector in many countries: firms are partially owned by the state and regulators are not necessarily independent. Among other things, we show that regulated firms issue more debt, invest more, and enjoy higher regulated prices when they face more independent regulators, are more privatized, and when regulators are more pro‐firm. Moreover, regulatory independence, higher degree of privatization, and pro‐firm regulatory climate are associated with higher social welfare.

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  • Carlo Cambini & Yossi Spiegel, 2016. "Investment and Capital Structure of Partially Private Regulated Firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(2), pages 487-515, April.
    • Handle: RePEc:bla:jemstr:v:25:y:2016:i:2:p:487-515
    DOI: 10.1111/jems.12153
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    3. Giulia Romano & Andrea Guerrini, 2019. "Paying Returns to Shareholders of Water Utilities: Evidence from Italy," Sustainability, MDPI, vol. 11(7), pages 1-12, April.
    4. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber & Stefan Stöckl, 2021. "Rather complements than substitutes: Firm value effects of capital structure and financial hedging decisions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 4895-4917, October.

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