IDEAS home Printed from
   My bibliography  Save this paper

Capital Structure and Regulation: Does Ownership Matter?


  • Carlo Cambini

    (Politecnico di Torino, DISPEA)

  • Bernardo Bortolotti

    (Università di Torino and Fondazione Eni Enrico Mattei)

  • Laura Rondi

    (Politecnico di Torino and CERIS-CNR)

  • Yossi Spiegel

    (Tel Aviv University and CEPR)


We construct a comprehensive panel data of 96 publicly traded European utilities over the period 1994-2005 in order to study the relationship between the capital structure of regulated firms, regulated prices, and investments, and examine if and how this interaction is affected by ownership structure. We show that firms in our sample increase their leverage after becoming regulated by an independent regulatory agency, but only if they are privately controlled. Moreover, we find that the leverage of these firms has a positive and significant effect on regulated prices, but not vice versa, and it also has a positive and significant effect on their investment levels. Our results are consistent with the theory that privately-controlled firms use leverage strategically to shield themselves against regulatory opportunism.

Suggested Citation

  • Carlo Cambini & Bernardo Bortolotti & Laura Rondi & Yossi Spiegel, 2007. "Capital Structure and Regulation: Does Ownership Matter?," Working Papers 2007.94, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2007.94

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Jean-Marie Grether & Jaime de Melo, 2003. "Globalization and Dirty Industries: Do Pollution Havens Matter?," NBER Working Papers 9776, National Bureau of Economic Research, Inc.
    2. Miketa, Asami & Mulder, Peter, 2005. "Energy productivity across developed and developing countries in 10 manufacturing sectors: Patterns of growth and convergence," Energy Economics, Elsevier, vol. 27(3), pages 429-453, May.
    3. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    4. Jean-Marie Grether & Nicole Andréa Mathys & Jaime de Melo, 2015. "Unravelling the Worldwide Pollution Haven Effect," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 23, pages 581-612 World Scientific Publishing Co. Pte. Ltd..
    5. Hettige, Hemamala & Martin, Paul & Singh, Manjula & Wheeler,David R., 1995. "The industrial pollution projection system," Policy Research Working Paper Series 1431, The World Bank.
    6. Arik Levinson, 2009. "Technology, International Trade, and Pollution from US Manufacturing," American Economic Review, American Economic Association, vol. 99(5), pages 2177-2192, December.
    7. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    8. Stern, David I., 2002. "Explaining changes in global sulfur emissions: an econometric decomposition approach," Ecological Economics, Elsevier, vol. 42(1-2), pages 201-220, August.
    9. David I. Stern, 2005. "Reversal in the Trend of Global Anthropogenic Sulfur Emissions," Rensselaer Working Papers in Economics 0504, Rensselaer Polytechnic Institute, Department of Economics.
    10. Cole, Matthew A. & Elliott, Robert J. R., 2003. "Determining the trade-environment composition effect: the role of capital, labor and environmental regulations," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 363-383, November.
    11. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    12. Jeffrey A. Frankel & Andrew K. Rose, 2005. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 85-91, February.
    13. Céline Carrère & Maurice Schiff, 2005. "On the Geography of Trade. Distance is Alive and Well," Revue économique, Presses de Sciences-Po, vol. 56(6), pages 1249-1274.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mario Pietrunti, 2010. "Regulation and Investment Incentives for Next Generation Broadband Access Networks," Chapters,in: Promoting New Telecom Infrastructures, chapter 2 Edward Elgar Publishing.
    2. Balazs Egert, 2009. "Infrastructure investment in network industries: The role of incentive regulation and regulatory independence," William Davidson Institute Working Papers Series wp956, William Davidson Institute at the University of Michigan.
    3. Hayam Wahba, 2014. "Capital structure, managerial ownership and firm performance: evidence from Egypt," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1041-1061, November.
    4. Nikogosian, Vigen & Weigand, Jürgen, 2012. "Forward integration and market entry: Evidence from natural gas markets for household customers in Germany," ZEW Discussion Papers 12-062, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Sarkar, Sudipto, 2015. "Price limits and corporate investment: The consumers' perspective," Economic Modelling, Elsevier, vol. 50(C), pages 168-178.
    6. Nikogosian, Vigen & Veith, Tobias, 2012. "The impact of ownership on price-setting in retail-energy markets—The German case," Energy Policy, Elsevier, vol. 41(C), pages 161-172.

    More about this item


    Regulated Utilities; Regulatory Agencies; Capital Structure; Leverage; Investment; Private and State Ownership;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2007.94. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.