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The Public‐Sector Cost of Capital: An Empirical Test of Peltzman’s Conjecture

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  • Marian W. Moszoro

Abstract

I test whether public‐sector ownership reduces conventional measures of market risk by using an event exogenous to the air transportation sector. I find that government‐sponsored enterprises show lower price volatility than non‐government‐sponsored enterprises, arguably due to the government’s ability to buffer government‐sponsored enterprises against demand and cost shocks. The upshot for jurisdictions with fiscal space is that cash flows under public‐sector provision should be discounted at a lower rate than cash flows under private‐sector provision.

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  • Marian W. Moszoro, 2021. "The Public‐Sector Cost of Capital: An Empirical Test of Peltzman’s Conjecture," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(5), pages 1273-1285, October.
    • Handle: RePEc:bla:obuest:v:83:y:2021:i:5:p:1273-1285
    DOI: 10.1111/obes.12433
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