The Capital Structure of Regulated Firms
AbstractThe equilibrium price, investment, and capital structure of a regulated firm are examined using a sequential model of regulation. The firm's capital structure is shown to have a significant effect on regulated prices, so that the firm's choice of debt and equity levels refelect regulatory responses. Moreover, debt financing weakens the incentive for regulators to "hold up" the firm so that leveraged firms can invest more than all-equity firms.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 942.
Date of creation: May 1991
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
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- Joskow, P.L., 2006.
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- Kuhn, Kai-Uwe, 2002. "Technology choice and capital structure under rate regulation: a comment," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 269-278, February.
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