41 Pages Posted: 27 Apr 2012
Date Written: April 23, 2012
We study the effect of state ownership on the market-to-book ratios of publicly traded European utilities observed from 1994 to 2005. We find that when the company is subject to independent regulation, state ownership is positively associated with firm value. This effect is strong and significant in countries where weak checks and balances and political fragmentation do not constrain the power of the executive. We conclude that where political institutions are weak, politicians imperfectly delegate powers to regulatory agencies in order to benefit state-owned firms.
Keywords: Privatization, Regulatory Independence, Political Institutions, Firm Value
JEL Classification: K23, L33, L51, L90, G32
Suggested Citation: Suggested Citation