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EFFICIENT PUBLIC‐PRIVATE CAPITAL STRUCTURES
Author(s) -
MOSZORO Marian
Publication year - 2014
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/apce.12028
Subject(s) - shareholder , business , private sector , public sector , finance , public capital , cost of capital , industrial organization , investment (military) , economics , microeconomics , production (economics) , public investment , corporate governance , economy , profit (economics) , economic growth , politics , political science , law
This paper presents a rationale for hybrid public‐private capital structures in public utilities. The public sector can borrow money cheaper, while private investors can spawn life‐cycle cost savings. When investment vehicles enable the internalization of the financial advantage of the public sector and the managerial advantage of the private sector, a Pareto‐efficient capital structure is achieved with both the public and private parties as shareholders. I show how different knowledge transfer schemes determine the optimal shareholding structure for the utility company.