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Financial distress in electricity distributors from the perspective of Brazilian regulation

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  • Scalzer, Rodrigo S.
  • Rodrigues, Adriano
  • Macedo, Marcelo Álvaro da S.
  • Wanke, Peter

Abstract

This study investigates which financial indicators can predict financial distress in Brazilian electricity distributors in relation to the targets established by the regulatory body. Specifically, identification of financial distress is possible based on the calculation of firm performance in relation to the regulatory targets, while its ability to predict is enabled by a multimodel inference for the selection of the best financial indicators based on the financial information data provided by the Brazilian regulator (ANEEL) of all existing 60 companies in the period from 2009 to 2015. Return on Assets (ROA) and liquidity measured by IL (Immediate Liquidity) and CL (Current Liquidity) stand out in their power to predict the companies with the worst regulatory performance. These results present valuable contributions to the development of new regulatory legislation in Brazil which resulted from the recent ANEEL public consultation aiming to implement monitoring of the economic and financial sustainability of Brazilian electricity distributors through financial indicators.

Suggested Citation

  • Scalzer, Rodrigo S. & Rodrigues, Adriano & Macedo, Marcelo Álvaro da S. & Wanke, Peter, 2019. "Financial distress in electricity distributors from the perspective of Brazilian regulation," Energy Policy, Elsevier, vol. 125(C), pages 250-259.
    • Handle: RePEc:eee:enepol:v:125:y:2019:i:c:p:250-259
    DOI: 10.1016/j.enpol.2018.10.018
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