Electricity Regulation in Brazil: Institutional Development and Regulatory Risks
1 Pages Posted: 17 Feb 2022
This study discusses regulatory agencies' development in Brazil in response to prior privatization. It highlights a case study of government officials' regulatory intervention in the electricity sector, which exposed the business environment to long-lasting regulatory risks. We empirically tested the impact of Provisional Measure 579/2012, which settled rules benefiting electricity consumers and reduced concessionaries' revenues. We provide a sample of 25 electricity companies and analyze differences in returns and systematic risks. Our results show a significant increase in systematic risk and equity cost and a reduction in stock returns even in other infrastructure sectors, evidencing contagion.
Keywords: Regulatory capture, Systematic Risk, Electricity Sector
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