18 novembre 2010 Carlo CAMBINI : « Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter? »

Capital Structure and Regulation: Do Ownership and Regulatory Independence Matter?

Bernardo Bortolotti (Università di Torino, FEEM), Carlo Cambini (Politecnico di Torino, IMT Lucca and FEEM), Laura Rondi (Politecnico di Torino, CERIS-CNR and FEEM) and Yossi Spiegel (Tel Aviv University, CEPR and ZEW)

Abstract: 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.

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