Regulation, Renegotiation and Capital Structure: Theory and Evidence from Latin American Transport Concessions
29 Pages Posted: 20 Apr 2016
Date Written: October 1, 2013
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.
Keywords: Debt Markets, Emerging Markets, Bankruptcy and Resolution of Financial Distress, Banks & Banking Reform, Economic Theory & Research
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