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Regulation, renegotiation and capital structure : theory and evidence from Latin American transport concessions

Author

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  • Moore, Alexander
  • Straub, Stephane
  • Dethier, Jean-Jacques

Abstract

The paper examines the capital structure of regulated infrastructure firms. The authors develop a model showing that leverage, the ratio of liabilities to assets, is lower under high-powered regulation and that firms operating under high-powered regulation make proportionally larger reductions in leverage when the cost of debt increases. They test the predictions of the model using an original panel dataset of 124 transport concessions in Brazil, Chile, Colombia and Peru over 1992-2011, finding broad support for our predictions.

Suggested Citation

  • Moore, Alexander & Straub, Stephane & Dethier, Jean-Jacques, 2013. "Regulation, renegotiation and capital structure : theory and evidence from Latin American transport concessions," Policy Research Working Paper Series 6646, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6646
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    References listed on IDEAS

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    1. Dasgupta, Sudipto & Nanda, Vikram, 1993. "Bargaining and brinkmanship : Capital structure choice by regulated firms," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 475-497.
    2. Eduardo Engel & Ronald Fischer & Alexander Galetovic & Manuel Hermosilla, 2009. "Renegociación de concesiones en Chile," Documentos de Trabajo 262, Centro de Economía Aplicada, Universidad de Chile.
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    4. Paulo Correa & Carlos Pereira & Bernardo Mueller & Marcus Melo, 2006. "Regulatory Governance in Infrastructure Industries: Assessment and Measurement of Brazilian Regulators," World Bank Publications, The World Bank, number 7059, April.
    5. J. Luis Guasch & Jean-Jacques Laffont & Stéphane Straub, 2007. "Concessions of infrastructure in Latin America: Government-led renegotiation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1267-1294.
    6. Klein, Michael, 2012. "Infrastructure policy: Basic design options," Frankfurt School - Working Paper Series 185, Frankfurt School of Finance and Management.
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    Citations

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    Cited by:

    1. Antonio Estache, 2016. "Institutions for Infrastructure in Developing Countries: What We Know and the Lot We still Need to Know," Working Papers ECARES ECARES 2016-27, ULB -- Universite Libre de Bruxelles.
    2. Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "Anatomy of Public-Private Partnerships : Their Creation, Financing, and Renegotiations," Discussion Paper 2014-017, Tilburg University, Center for Economic Research.
    3. Miranda Sarmento, J.J. & Renneboog, Luc, 2017. "Renegotiating Public-Private Partnerships," Discussion Paper 2017-014, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    Debt Markets; Emerging Markets; Bankruptcy and Resolution of Financial Distress; Banks&Banking Reform; Economic Theory&Research;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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