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Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?
Author(s) -
Bortolotti Bernardo,
Cambini Carlo,
Rondi Laura,
Spiegel Yossi
Publication year - 2011
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2011.00296.x
Subject(s) - leverage (statistics) , business , panel data , regulatory agency , capital structure , independence (probability theory) , sample (material) , monetary economics , industrial organization , economics , finance , econometrics , welfare economics , statistics , mathematics , debt , chemistry , chromatography , machine learning , computer science
We study the effect of ownership structure and regulatory independence on the interaction between capital structure and regulated prices using a comprehensive panel data of publicly traded European utilities. We find that firms in our sample tend to have a higher leverage if they are privately controlled and regulated by an independent regulatory agency. Moreover, the leverage of these firms has a positive and significant effect on their regulated prices, but not vice versa. Our results are consistent with the theory that privately controlled regulated firms use leverage strategically to obtain better regulatory outcomes.