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Investment and capital structure of partially private regulated firms

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  • Cambini, Carlo
  • Spiegel, Yossi

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 firms invest more, issue more debt, and are allowed to charge higher prices when they are more privatized and when the regulator is more independent and more pro-firm.

Suggested Citation

  • Cambini, Carlo & Spiegel, Yossi, 2011. "Investment and capital structure of partially private regulated firms," CEPR Discussion Papers 8508, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8508
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    References listed on IDEAS

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    1. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
    2. Geoff Edwards & Leonard Waverman, 2006. "The Effects of Public Ownership and Regulatory Independence on Regulatory Outcomes," Journal of Regulatory Economics, Springer, vol. 29(1), pages 23-67, January.
    3. Carlo Cambini & Laura Rondi, 2012. "Capital structure and investment in regulated network utilities: evidence from EU telecoms," Industrial and Corporate Change, Oxford University Press, vol. 21(1), pages 31-71, February.
    4. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, September.
    5. Bernardo Bortolotti & Carlo Cambini & Laura Rondi & Yossi Spiegel, 2011. "Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 517-564, June.
    6. Corria da Silva, Luis & Estache, Antonio & Jarvela, Sakari, 2006. "Is debt replacing equity in regulated privatised infrastructure in LDCs?," Utilities Policy, Elsevier, vol. 14(2), pages 90-102, June.
    7. Roland Strausz, 2009. "The Political Economy of Regulatory Risk," SFB 649 Discussion Papers SFB649DP2009-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    8. Roland Strausz, 2011. "Regulatory Risk Under Optimal Monopoly Regulation," Economic Journal, Royal Economic Society, vol. 121(553), pages 740-762, June.
    9. Balazs Egert, 2009. "Infrastructure Investment in Network Industries: The Role of Incentive Regulation and Regulatory Independence," CESifo Working Paper Series 2642, CESifo.
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    Cited by:

    1. Carlo Cambini & Laura Rondi & Yossi Spiegel, 2012. "Investment and the Strategic Role of Capital Structure in Regulated Industries: Theory and Evidence," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.),Recent Advances in the Analysis of Competition Policy and Regulation, chapter 13, Edward Elgar Publishing.

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    More about this item

    Keywords

    debt; government ownership; investment; regulation; regulatory climate; regulatory independence;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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