Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?

46 Pages Posted: 17 Feb 2009

See all articles by Bernardo Bortolotti

Bernardo Bortolotti

Bocconi University; University of Turin

Carlo Cambini

Politecnico di Torino & EUI - Florence School of Regulation; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Laura Rondi

Politecnico di Torino

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); ZEW – Leibniz Centre for European Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

Abstract

We construct a comprehensive panel data of 92 publicly traded European utilities over the period 1994-2005 in order to study the relationship between capital structure, regulated prices, and firm value, and examine if and how this interaction is affected by ownership structure and regulatory independence. We show that regulated firms in our sample tend to have a higher leverage if they are privately-controlled and if they are regulated by an independent regulatory agency. Moreover, we find that the leverage of these firms has a positive and significant effect on their regulated prices, but not vice versa, and it also has a positive and significant effect on their market values. Our results are consistent with the theory that privately-controlled firms use leverage strategically to shield themselves against regulatory opportunism.

Keywords: capital structure, leverage, private and state ownership, Regulated utilities, regulatory agencies, regulatory independence

JEL Classification: G31, G32, L33

Suggested Citation

Bortolotti, Bernardo and Cambini, Carlo and Rondi, Laura and Spiegel, Yossi, Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter? (December 2008). CEPR Discussion Paper No. DP7100. Available at SSRN: https://ssrn.com/abstract=1344679

Bernardo Bortolotti (Contact Author)

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100
Italy

Carlo Cambini

Politecnico di Torino & EUI - Florence School of Regulation ( email )

Corso Duca degli Abruzzi, 24
Torino, Torino 10129
Italy
+390115647292 (Phone)
+390115647299 (Fax)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Laura Rondi

Politecnico di Torino ( email )

Department of Management
Corso Duca degli Abruzzi, 24
Torino, 10129
Italy
+39 011 0907232 (Phone)

Yossi Spiegel

Tel Aviv University, Coller School of Management ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
8
Abstract Views
685
PlumX Metrics