Determinants of Debt and Economic Regulation: An Analysis of Brazilian Regulated Infrastructure Firms
23 Pages Posted: 17 Aug 2017
Date Written: August 14, 2017
This paper examines whether or not firms in regulated sectors present different indebtedness levels in comparison to firms in unregulated sectors, that is, whether or not an economically regulated environment impacts a firm’s indebtedness level. We present an analysis of panel data for a sample of Brazilian regulated and unregulated firms. After controlling for the variables recommended by the empirical literature addressing capital structure, our evidence shows that regulated firms engage in more indebtedness relative to unregulated ones, most prominently in the long-term, with some short-term exceptions idiosyncratic to the Brazilian experience. Profitability is a robust attribute of Brazilian firm indebtedness with a negative and significant impact both in the short- and long-term, and the regulated long-term real interest rate has a significant negative impact on long-term firm indebtedness.
Keywords: Capital Structure; Debt; Leverage; Economics of Regulation; Infrastructure
JEL Classification: G32; G38; L51
Suggested Citation: Suggested Citation