Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?
Università di Torino
Polytechnic University of Turin
Politecnico di Torino - Faculty of Engineering; CERIS-CNR
Tel Aviv University - The Leon Recanati Graduate School of Business Administration
Journal of Economics & Management Strategy, Vol. 20, Issue 2, pp. 517-564, 2011
We study the effect of ownership structure and regulatory independence on the interaction between capital structure and regulated prices using a comprehensive panel data of publicly traded European utilities. We find that firms in our sample tend to have a higher leverage if they are privately controlled and regulated by an independent regulatory agency. Moreover, the leverage of these firms has a positive and significant effect on their regulated prices, but not vice versa. Our results are consistent with the theory that privately controlled regulated firms use leverage strategically to obtain better regulatory outcomes.
Number of Pages in PDF File: 48Accepted Paper Series
Date posted: April 21, 2011
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