Is Debt Replacing Equity in Regulated Privatized Infrastructure in Developing Countries?

22 Pages Posted: 10 Aug 2004

See all articles by Luis Correia da Silva

Luis Correia da Silva

Oxford Economic Research Associates (OXERA)

Antonio Estache

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Sakari Javerla

Oxford Economic Research Associates (OXERA) Consulting Ltd.

Date Written: August 12, 2004

Abstract

Da Silva, Estache, and Jarvela describe the evolution of the financing structure of regulated privatized utilities and transport companies. To do so, they rely on a sample of 121 utilities distributed over 16 countries, and 23 transport infrastructure operators and 23 transport services operators distributed over 23 countries. The authors show that leverage rates vary significantly across sectors, with the highest rates observed in transport and the lowest in water. Moreover, they also show that the 1997 Asia crisis led operators to adjust their financial structure differently in different regions. Overall, the evidence they present shows that debt is replacing equity in financing the investment needs of utilities and transport services in developing countries. These results raise some questions as to whether the regulator's mandate should be expanded to monitor the financial structure of companies and as to whether the international community should make a stronger commitment to more transparent regulatory accounting systems.

This paper - a product of the Office of the Vice President, Infrastructure Network - is part of a larger effort in the network to generate quantitative information on infrastructure.

Keywords: Infrastructure, Privatization, Regulation

JEL Classification: L51

Suggested Citation

Correia da Silva, Luis and Estache, Antonio and Javerla, Sakari, Is Debt Replacing Equity in Regulated Privatized Infrastructure in Developing Countries? (August 12, 2004). World Bank Policy Research Working Paper. Available at SSRN: https://ssrn.com/abstract=573741

Luis Correia da Silva

Oxford Economic Research Associates (OXERA) ( email )

Alfred Street
Oxford OX1 4EH
United Kingdom
+44 (01865) 251 142 (Phone)

Antonio Estache (Contact Author)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
32 (0)2 6503838 (Phone)

Sakari Javerla

Oxford Economic Research Associates (OXERA) Consulting Ltd. ( email )

Alfred Street
Oxford OX1 4EH
United Kingdom

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