Working Paper: CEPR ID: DP8508
Authors: Carlo Cambini; Yossi Spiegel
Abstract: We develop a model that examines the capital structure and investment decisions of regulated firms in a setting that incorporates two key institutional features of the public utilities sector in many countries: firms are partially owned by the state and regulators are not necessarily independent. Among other things, we show that firms invest more, issue more debt, and are allowed to charge higher prices when they are more privatized and when the regulator is more independent and more pro-firm.
Keywords: regulation; debt; investment; government ownership; regulatory independence; regulatory climate
JEL Codes: G32; L33; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Privatization (L33) | Investment (G31) |
| Privatization (L33) | Debt Issuance (H63) |
| Regulatory Independence (L51) | Investment (G31) |
| Regulatory Independence (L51) | Debt Issuance (H63) |